Delhaize Posts Weak Q2 for U.S. Stores

Despite flat revenues and comparable-store sales growth of 5.0 percent at its Belgian locations for the second quarter of fiscal 2010, retail conglomerate Delhaize Group experienced losses at its still economically depressed U.S. operations. Company president and CEO Pierre-Olivier Beckers noted last week, however, that the grocer was making “steady progress” with its New Game Plan, which has so far included the restructuring of Delhaize’s American business.

Second-quarter revenues from U.S. operations decreased by 2.8 percent in local currency to USD $4.7 billion, as a result of a 3.6 percent decline in comps caused by weak sales at Food Lion and the adverse impact of the timing of the Easter holiday. By contrast, the company said its Hannaford operations were performing well. Private brand penetration continued to grow vs. last year at Delhaize’s U.S. stores.

“In the second quarter of this year, we were able to maintain stable revenues for our group, despite negative inflation resulting from our structural price investments at Food Lion and persistent difficult trading conditions in the U.S Southeast,” noted Beckers, adding that “[w]hile we are disappointed in our Southeast U.S. sales numbers, we believe they are not reflective of the underlying strength and the long term growth potential of the business. We are committed to our strategic price investments started at the beginning of the year at Food Lion and believe that we have the right value proposition to respond to the needs of pressured consumer. We are encouraged by the fact that we have been able to keep selling, general and administrative expenses in the U.S. flat in nominal terms. Effective initiatives have allowed us to keep a stable gross margin while our operating margin, even though impacted by negative sales leverage, stayed at a healthy level.”

Beckers added that the company was “on track” to realize significant cost savings through such major measures as “the creation of a single procurement organization for Delhaize America, which will combine all our U.S. buying functions, a natural next step towards becoming a stronger and unified U.S. entity.”

For the first half of 2010, Delhaize’s U.S. revenues fell 1.6 percent at identical exchange rates. At the end of June 2010, the Brussels-based company operated 1,600 supermarkets in the United States.

On the basis of its half-year results and its ongoing price investments, Delhaize has updated its full-year guidance to -2 percent to 2 percent operating profit growth from the earlier forecast 2 percent to 5 percent (excluding last year’s U.S. restructuring, store-closing and impairment charges), both at identical exchange rates.

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