Delhaize Q3 Earnings Beat Forecast

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Delhaize Q3 Earnings Beat Forecast

Belgian supermarket group Delhaize reported third-quarter earnings above analysts' expectations on Thursday, and kept its forecast intact for 2008 in spite of a rough economy.

The group reported third-quarter revenue growth of 4.8 percent, and noted that results were based on identical exchange rates.

"During the third quarter, our revenues grew at a solid pace at all of our operations in spite of the ongoing difficult consumer environment," said Pierre-Olivier Beckers, president and c.e.o. of Delhaize Group. "The continued success of our private label products and commitment to competitive pricing through cost savings initiatives have contributed to our improving sales momentum."

The company posted group share in net profit increase of 4.2 percent for the quarter. With 70 percent of its sales in the United States, Delhaize said net profit from continuing operations came in at 103.4 million Euros ($132.9 million), beating an average forecast of 96 million Euros in a Reuters poll of seven analysts. The company had significant comparable store sales growth in the U.S. at 2.5 percent. The quarterly operating profit rise was 8.3 percent. Delhaize's net debt to equity ratio decreased to 58.9 percent.
In its U.S. operations, Delhaize revenues grew by 3.8 percent in the third quarter of this year to $4.8 billion compared to 2.3 percent growth in the second quarter of 2008. Private label revenues increased in the group's three U.S. operating companies, with private label penetration rising above 19 percent at Food Lion during the quarter, up from less than 17 percent at the beginning of 2007. At Sweetbay, the average number of transactions continued to increase due to improved customer satisfaction and price perception supported by significant price investments that started in the summer of 2007.

At the end of September 2008, Delhaize Group operated 1,577 supermarkets in the U.S. In the third quarter of this year, Food Lion opened two new stores and relocated one store. Food Lion continued the renewal work in the Charlottesville and Richmond, Va. markets, which were re-launched at the beginning of the fourth quarter. Sweetbay opened three new stores, closed one store and relocated one other store.
In the third quarter of 2008, operating profit increased by 3.5 percent at identical exchange rates, as a result of an increase in gross margin partly offset by a slight increase in operating expenses. Gross margin grew in the third quarter mainly due to an increase in private label sales in the fresh and dry grocery categories at Delhaize's three U.S. companies, particularly at Food Lion. The slight increase in operating expenses was the result of higher energy costs for the three businesses and higher advertising and staff costs at Food Lion partly offset by cost improvements, particularly at Hannaford and Sweetbay.
In 2008, Delhaize Group plans to open between 37 and 42 new supermarkets in the U.S. In addition, the Group expects to close approximately 13 stores of which seven will be relocated, resulting in a net increase of 24 to 29 stores. Approximately 150 U.S. stores will be remodeled in 2008. Food Lion will remodel 141 stores as part of its market and store renewal programs.