Delhaize Posts Q3 U.S. Gains
International retail conglomerate Delhaize Group has posted revenue growth of 2.9 percent at identical exchange rates (3.1 percent organic growth) for the third quarter of 2013, along with comparable-store sales increases of 2.2 percent in the United States and 1.5 percent in Belgium. The quarter also saw the appointment of Frans Muller as the Brussels-based company’s new CEO, effective Nov. 8.
In the third quarter, U. S. revenues rose 2.2 percent to $4.4 billion. Excluding the effect of 11 stores closed in February 2013, U.S. revenues grew 2.6 percent. While the company experienced low retail inflation of 0.5 percent, volume growth was positive for the fourth consecutive quarter, driven by volume growth at both Food Lion and Hannaford. On Nov. 13, Delhaize will roll out Phase 5 of its Food Lion brand repositioning initiative in the banner’s seaboard North and South Carolina markets, which will complete the phased project begun in May 2011. Delhaize also received positive feedback to the targeted price investments introduced earlier this year at Hannaford.
Also during the quarter, underlying operating profit at the company’s U.S. chains fell 20.2 percent to $169 million, leading to an underlying operating margin of 3.9 percent, from last year’s 4.9 percent. Delhaize attributed this decline to the release of the bonus accrual in the third quarter of 2012 and a lower gross margin caused by the Hannaford and Phase 4 price investments.
The company additionally noted that it now expected its transaction with Jacksonville, Fla.-based Bi-Lo Holdings on the divestiture of Delhaize’s Sweetbay Supermarket, Harveys and Reid’s banners – a total of 155 stores -- as well as the leases of 10 previous Sweetbay locations, to be completed during the first quarter of 2014, rather than in the fourth quarter of 2013 as announced earlier.
“We delivered solid results in the U.S. during the third quarter,” noted Pierre-Olivier Beckers, president and CEO of Delhaize, who is retiring Nov. 8. “Food Lion continued to show good momentum, as reflected in the fourth consecutive quarter of positive volume and comparable-store sales growth. At Hannaford, we experienced similar positive trends supported by further price investments since the second quarter.”
Added Beckers: “In Belgium, we have maintained market share, helped by network expansion and higher comparable store sales growth. As a result of our decision to increase price investments and promotions, profitability has declined. In Southeastern Europe, we continue to maintain or even improve our market share in the largest three markets. This has resulted in further improved profitability for the region as a whole.”
Of his successor, he said: “Since joining the company a few weeks ago, Frans has spent a lot of time at our various European and American operations and has already brought a lot of energy to the group. His experience in food retail, combined with continued positive momentum in the group and our solid balance sheet, strengthens my confidence in the future of Delhaize Group.”
Regarding the company’s outlook, Beckers was optimistic: “For 2013, we reiterate our confidence that the group will generate an underlying operating profit of at least 755 million pounds (USD $1 billion) at identical exchange rates and a free cash flow of approximately 500 million pounds (USD $668.8 million).”