Delhaize Posts ‘Solid’ U.S. Comps in Q4

Delhaize Group reported fourth-quarter comparable-sales growth of 3.6 percent in the U.S., although comps fell 6.9 percent in the retail conglomerate’s home country of Belgium and 2.2 percent at its stores in southeastern Europe. Group revenue growth was 1.3 percent, excluding a 53rd trading week in the U.S.

For 2014, the company posted a 4.4 percent increase in U.S. comps and a 3.5 percent decline in Belgian comps, and an underlying operating profit of $814 million, excluding the 53rd week in the U.S., a 6.3 percent decline. Including the 53rd week, operating profit was $842 million.

Q4 U.S. revenues increased 12.1 percent to $4.7 billion. Excluding the 53rd week, revenues grew 3.8 percent to $4.3 billion. Both Hannaford and Food Lion continued to see positive real sales growth. Underlying operating profit rose 44.1 percent to $199 million. Underlying operating margin for the quarter was 4.2 percent, from 3.3 percent in 2013. Excluding the 53rd week, underlying operating profit increased 20.7 percent to $166 million. Underlying operating margin increased from 3.3 percent to 3.8 percent, which the company attributed to a higher gross margin aided by a favorable sales mix, along with lower selling, general and administrative expenses as a percentage of revenues.

In 2014, U.S. operations generated revenues of $17.7 billion, a 6.6 percent increase in local currency compared with 2013. Excluding the 53rd week, revenues climbed 4.5 percent. The U.S. gross margin plunged 22 basis points to 25.9 percent, which the company said was primarily because of cycling last year's price investments at Food Lion. Selling, general and administrative expenses as a percentage of revenues were 22.2 percent, a 39-basis-point decline the company attributed to ongoing cost control. The underlying operating margin of Delhaize’s U.S. business rose five basis points to 4.1 percent (4 percent in 2013), primarily because of a lower SG&A-expenses-versus-revenues ratio more than offsetting the lower gross margin, the company explained. Underlying operating profit grew 8 percent to $720 million. Excluding the 53rd week, underlying operating profit went up 3.2 percent to $687 million and the underlying operating margin fell five basis points to 3.9 percent.

"[B]oth Food Lion and Hannaford achieved solid revenue growth while maintaining profitability,” said Delhaize CEO Frans Muller. "In Belgium, after several difficult months, we have now reached an agreement with our social partners and are starting to implement the different steps of the Transformation Plan. In southeastern Europe, market share increases are encouraging, despite the continued challenging economic backdrop."

Continued Muller: "The 'Easy, Fresh & Affordable' strategic initiative, which is designed to differentiate Food Lion relative to its local competitors, has made good progress in 2014. Therefore, we will roll out Easy, Fresh & Affordable to an additional 160 stores in 2015. We believe this will favorably position us in an increasingly competitive southeastern U.S. market. While we are focused on maintaining our sales momentum, we are also mindful of non-recurring costs related to Food Lion's strategic initiatives. In Belgium, we are confident that the execution of the Transformation Plan, coupled with investments in our commercial proposition and in our store network, will allow us to regain a leading market position."

In other Delhaize news, the company has appointed Philippe Dechamps to the position of general counsel and corporate secretary. "Philippe brings multinational experience, a solid understanding of our business as well as sound legal judgment to help us achieve our objectives while continuing to promote a culture of integrity across the group," noted Muller.

Having joined Delhaize in 2008, Dechamps most recently held the role of SVP, general counsel Europe and Asia. He began his legal career at Linklaters, and later led legal functions and directed legal strategy at various divisions of Solvay Group, Guidant Corp. and Abbott Laboratories.

An international food retailer present in seven countries on three continents, Brussels-based Delhaize operates 3,402 stores and employs about 150,000 people.

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