Delhaize Posts 'Mixed' Q1

For its first quarter of 2014, Brussels-based Delhaize Group reported 2.8 percent revenue growth at identical exchange rates, comparable-store sales growth of 4.6 percent in the United States and -0.8 percent in Belgium. Group underlying operating profit of 161 million euros (US $224.1 million) and group underlying margin of 3.1 percent (3.6 percent in the United States and 3.1 percent in Belgium).

"Our first quarter shows a mixed performance, with very strong revenues in the U.S. but disappointing results in Belgium," acknowledged Delhaize President and CEO Frans Muller. "In the U.S., our comparable-store sales growth was primarily driven by the continued momentum at Food Lion. Hannaford comparable-store sales growth was also positive. As expected, our price investments and commodity cost increases impacted our margin. In Belgium, we experienced weak first-quarter sales and profitability, being the result of continuing vigorous competition, requiring more promotions and price investments, as well as a further increase in SG&A costs. At the same time, customer satisfaction improved compared to last year. While we continued to face challenges in Serbia, we achieved comparable-store sales growth and further market share gains in Greece and Romania."

Added Muller: "In light of our focus on our core markets announced in March, we have recently signed agreements to divest our Bulgarian and Bosnian & Herzegovinian operations. We are on track to implement our strategy of 'Easy, Fresh & Affordable' at 77 Food Lion stores later in the year. In Belgium, we are working on further differentiating the customer experience in our stores. The opening of two next-generation stores in Belgium 10 days ago, bringing to life our new strategy centered on 'Buy Well, Eat Well,' is an important step to improve our performance.'

Food Lion, Hannaford Revenues Up

In the first quarter of 2014, Delhaize’s U.S. revenues grew by 4.1 percent to $4.4 billion (3.2 billion euros). The 4.6 percent increase in comp sales noted above was further aided by severe winter weather. Retail inflation remained negative at -0.2 percent, which Delhaize attributed to its price investments in Food Lion phase-four and -five stores and at Hannaford, although it admitted that inflation began to rise in some fresh categories.

Underlying U.S. operating profit declined 8.2 percent to $155 million, for an underlying operating margin of 3.6 percent, versus last year's 4 percent. Delhaize said the decrease was attributable to a lower gross margin caused by price investments, commodity cost increases and costs related to the snowstorms, while its SG&A as a percentage of revenues fell mainly because of positive sales leverage and 2013's reorganization.

"[F]or 2014, our capital expenditures will increase to approximately 625 million euros (US $730.9 million) at identical exchange rates, and we plan to open 180 stores," noted Muller. "We also intend to continue to generate a healthy level of free cash flow."

Present in nine countries on three continents, Delhaize operates 3,520 stores and employs about 160,000 associates.