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Food Lion to Acquire 10 Winn-Dixie Stores; Third Market Relaunch Set for '05

SALISBURY, N.C. and BRUSSELS, Belgium - Signaling its plans for continuous growth in the eastern U.S., Food Lion said yesterday it has signed a definitive agreement to acquire 10 Winn-Dixie stores in North Carolina and Virginia.

Food Lion's parent company, Delhaize Group, also noted during an investors' conference call yesterday that Food Lion will initiate a third market relaunch in Greensboro, N.C. next summer, following the success of its relaunches in Raleigh and Charlotte.

The acquisition of 10 Winn-Dixie stores is being paid for in cash, out of Food Lion's planned 2004 capital expenditures budget. Food Lion said it will re-brand five of the six stores in Virginia with only a few days' gap in store operations. The store in Elizabethtown, N.C. will be remodeled significantly to replace Food Lion's current location in that town. The remaining locations will be further analyzed so that Food Lion can determine how they best fit in with its growth plans.

During the Delhaize conference call, Food Lion c.e.o. Rick Anicetti said the Winn-Dixie stores are consistent with Food Lion's standard footprint, noting that they fall into the 38,000- to 40,000-square-foot range.

Delhaize Group c.e.o. Pierre-Olivier Beckers said the company continues to look for external growth opportunities, "in the form of targeted acquisitions in existing or contiguous markets with strong synergies."

Building on the success of its Food Lion market relaunches in Raleigh, N.C. and in Charlotte, N.C., Delhaize announced plans for a third relaunch in the Greensboro, N.C. market. The full market remodel program, which will begin in the next several weeks and encompass approximately 70 stores, should be ready to launch next summer, the company said.

"In the future, we'd expect to see a ramping up of the speed in which we can do these market relaunches," said Anicetti, noting that Charlotte was an easier endeavor due to the company's learnings in Raleigh. Specifically, the company gained a reduction in capital expenditures per store remodeling by about 20 percent in Charlotte. Anicetti declined to name additional markets being considered for future relaunches.

Regarding its other U.S. banners, Delhaize said it expects to convert 12 more Food Lion stores to its Harvey's banner in southern Georgia and northern Florida next year. The company also announced that its Hannaford division has gained FTC approval to acquire 19 Victory Supermarkets, a move that will expand Hannaford's presence in Massachusetts and New Hampshire. The company plans to close the transaction before the end of the year.

Delhaize's net earnings in the third quarter of 2004 increased by 33.2 percent to euro 71.2 million ($91.7 million). The company attributed the gain to good sales momentum, as well as improved margins, due in part to better shrink control at Food Lion from the full rollout of the inventory control and margin management system PRISM.

Third-quarter sales at Delhaize decreased by 3.2 percent to euro 4.5 billion, due in part to the weakening of the U.S. dollar, while comparable store sales grew 1.7 percent.

-- Jenny McTaggart
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