Delhaize Group Cuts Profit Forecast, Citing Weak Consumer Environment

Delhaize Group, owner of Food Lion, Hannaford, and Sweetbay Supermarkets in the U.S., cut its annual profit forecast on Friday because of what it said was the continued weakening of the consumer environment in the U.S. and Europe.

The Belgian retailer projected that net income for 2008 will increase by 15 to 20 percent, down from a previous forecast of 25 to 30 percent.

Annual sales growth should be between 3 and 4.5 percent, Delhaize added, less than its previous forecast of 4 to 5.5 percent.

Revenue at comparable U.S. stores, which are open a year or more, will grow 1.5 to 2.5 percent in 2008, compared with the company's previous goal of 2.5 percent to 3.5 percent, the grocer said.

The lowered expectations are in response to consumers in the U.S. and Europe turning toward cheaper merchandise, and buying fewer items per visit as higher oil and food prices sap disposable incomes, Delhaize said. The retailer has added private label products, lowered prices, and offered in-store promotions in an effort to lure customers.

Delhaize also released projected second-quarter revenues and operating profit, ahead of the publication of its full results on Aug. 4. It said it expects second-quarter operating profit to fall 22 percent, to 194 million euros ($308 million). The decline is 12 percent at identical exchange rates, Delhaize said. Projected sales for the quarter are 4.5 billion euros ($7.13 billion), a decrease of 7.5 percent at actual exchange rates and an increase of 2.6 percent at identical exchange rates.

Comparable stores sales growth is projected to be 1.9 percent for the U.S.

“In this challenging market environment, we remain focused on reinforcing our store concepts and execution, supported by our experienced management teams and strong profitability and balance sheet,” said Pierre-Olivier Beckers, president and c.e.o. of Delhaize Group. “To increase our relevance to the pressured consumers, all of our operating companies continue to build their private label offering and to increase their price competitiveness and promotional activity.”
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