Despite Losses, Ahold Reports 'Encouraging' Q1

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Despite Losses, Ahold Reports 'Encouraging' Q1

AMSTERDAM -- Despite the lower overall net sales and operating income posted in Ahold's interim financial report for the first quarter of 2007, outgoing president and c.e.o. Anders Moberg characterized the results as "an encouraging start to the year," as the company was able to achieve many of its goals.

"We registered positive identical sales at all banners except Giant-Landover, core retail operating margins are developing in line with our expectations, and significant progress was made on reducing core Corporate Center costs," noted Moberg in an explanatory statement. "Our divestment program is progressing well: We recently announced the agreement on the sale of U.S. Foodservice, subject to shareholder approval. Our Value Improvement Program at Stop & Shop and Giant-Landover is being rolled out as planned, and we see encouraging improvements in the way customers perceive price and quality."

The retail conglomerate posed net sales of 13.2 billion euros, a decline of 0.7 percent from the same period last year. At constant exchange rates, net sales grew 5.8 percent. Operating income was 421 million euros, a decrease of 3 million euros from the year-ago period.

At Stop & Shop/Giant-Landover net sales for the quarter were $5.1 billion, up 1.8 percent vs. last year; identical sales were up 0.3 percent at Stop & Shop (down 0.1 percent excluding gasoline net sales) and down 1.1 percent at Giant-Landover. Operating income came to $228 million, or 4.5 percent of net sales, a decline of $61 million from the year-ago period. The quarter included restructuring charges of $9 million, while the first quarter of 2006 was positively affected by a one-time post-employment benefits adjustment of $27 million. Moreover, margins were reduced by price investments connected with the further rollout of the Value Improvement Program.

Giant-Carlisle's first-quarter net sales of $1.3 billion increased 16 percent from the same period last year, partly due to the impact of the Clemens acquisition, and identical sales grew 4.4 percent (3.9 percent excluding gasoline net sales). Operating income rose $5 million, to $56 million, or 4.3 percent of net sales.

For the soon-to-be-sold U.S. Foodservice, first-quarter net sales rose 4.4 percent, to $6.1 billion. Operating income was $104 million, vs. $80 million last year, and operating margin was 1.7 percent. The company attributed the improvement mainly to lower operating costs.