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Delhaize Q3 Profits Flat; U.S. Sales Up

BRUSSELS, Belgium -- U.S. sales for Delhaize Group based here jumped 5.1 percent in the third quarter, but overall net profit declined 1 percent to EUR 89.7 million ($104.8 million), due to expenses and a weaker sales performance in Belgium.

C.e.o. Pierre-Olivier Beckers said the company's largest U.S. banner, Salisbury, N.C.-based Food Lion, will launch its next market renewal in the Washington market in 2006; and will also enter a new market next year, Greenville-Spartanburg in South Carolina.

Total second-quarter sales for the Delhaize Group increased 5.1 percent to EUR 4.7 billion ($5.5 billion). U.S. sales, which account for the group's majority, were supported by stronger sales momentum at Food Lion and the acquisition of Victory Supermarkets in New England. Comparable store sales grew by 1.6 percent for the U.S. operations, a strong improvement compared with 0.2 percent in the second quarter. Operating profit of the U.S. business increased by 0.4 percent to $226.2 million.

"In the third quarter, we have seen that our initiatives to further differentiate our store concepts and improve our execution have resulted in accelerated sales and earnings momentum compared to the second quarter of 2005, particularly at Food Lion, our largest banner," said Beckers in a statement. "However, expenses related to long-term strategic initiatives such as the Victory and Sweetbay conversions, and higher energy prices continued to impact negatively our operating margin, and the sales performance in Belgium remained weak due to soft consumer spending."

In spite of difficult market conditions in Belgium and higher energy prices, Beckers said the company expects operating profit to increase by 2 percent to 4 percent in 2005. He confirmed sales and net earnings guidance of respectively 3.5 percent to 4.5 percent growth and 15 percent to 20 percent growth in 2005.

During the third quarter, Food Lion enjoyed improving sales momentum due to effective price, promotion and marketing initiatives, better execution in its stores, the successful re-launch of the Greensboro, N.C. market in June, and store closings by Winn-Dixie, the company noted. Hannaford and Sweetbay continued to perform well; however, sales at Kash n' Karry, and Harveys were weak due to competitive activity and unfavorable comparisons to periods of greater hurricane activity in 2004 in its territories.

The market renewal in Greensboro, N.C., which included 58 remodeled stores, had the best start since the launch of Food Lion's market revamp program in 2003, the company said, with strong sales growth driven by new customers and an increase in the average sales per customer. In early October, Food Lion re-launched its second market renewal of the year, in Baltimore, Md.

Food Lion will continue to evaluate the use of its two experimental banners, Bloom and the recently unveiled low-price Bottom Dollar concept, together with the Food Lion and Harveys banners for its different customer segments and marketplaces, the company said.

Three Kash n' Karry stores were converted to the Sweetbay Supermarket concept in the third quarter. At the end of September, 20 Sweetbay stores were in operation, and the sales results continued to be strong, Delhaize said. Five additional stores will be converted or opened under the Sweetbay banner by the end of 2005. The Sarasota/Bradenton market is nearly converted, and the Tampa/St. Petersburg market will be fully converted in 2006.

Delhaize Group is present in eight countries on three continents. At the end of September 2005, Delhaize Group's sales network consisted of 2,629 stores.
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