Delhaize released disappointing figures for the fourth quarter of 2011 today, bringing the complete results for the year down as well. The group has announced to close 146 stores (in South-eastern Europe and the US, not in Belgium), thereby axing an estimated 5000 jobs.
"Disappointed in our results"
The total figures look quite well at first glance, with a rise of 7.0% in Q4 and 4.6% for the whole year. The overwhelming majority of these rises however was caused by the acquisition of Serbian retailer Delta Maxi. In the fourth quarter, organic growth was only 1.5% worldwide, and even -0.4% in the US and -1.5% in Belgium.
“We are disappointed in the fourth quarter revenues in the US and Belgium”, as CEO Pierre-Olivier Beckers reacted, blaming lower consumer confidence and the difficult economic environment. “We also encountered an increase in competitive activity. We are determined to further improve our price competitiveness in 2012, particularly in the US and Belgium” he added.
Change of focus in the US
Despite its total growth in the US (+2.2% to $19.2 billion), rising inflation and decreasing sales volumes caused Delhaize to decide to close 113 underperforming Food Lion stores in the next 30 days. Food Lion however remains Delhaize's strongest brand in the US, which is proven by its decision to rebrand 42 Bloom stores into Food Lions. The other 7 Blooms will be closed as well, and the Bloom brand will cease to exist.
Delhaize has also decided to focus its Bottom Dollar Food chain in its most successful clusters. 22 of the stores in Virginia, Maryland and North Carolina will join the Food Lion network, while 6 others will be closed. On the other hand, the group has confirmed its plans to open hundreds of Bottom Dollar Food stores in areas like Philadelphia and Pittsburgh.
Maxi growth in South-eastern Europe
The good news came from South-eastern Europe: in the region SEE/Asia, turnover grew 62.9% in Q4 (+32.0% in 2011), pushed higher by the inclusion of Delta Maxi on 1 August. The group is also proud of its strong results in Romania (Mega Image) and Greece (Alfa Beta), performing stronger than the market as a whole there.
Belgium's low consumer confidence
In the home market, Delhaize saw its revenues rise to 4.8 billion euro in 2011 (+0.9%, but -0.6% like-for-like). Decreasing consumer confidence pushed the Q4 results down 1.5% like-for-like, but 16 new store openings meant the total result still was slightly positive (+0.9%).
Delhaize has experienced the same evolution most European retailers witnessed: consumers buy fewer, and cheaper, products. For the group, this meant a significant growth for private label 365 and for its discount chain Red Market at the expense of 'regular' Delhaizes.
Worldwide expansion in 2011 and 2012
The Delhaize Group had 2,800 stores at the end of 2010 and expanded in all its five markets during 2011 (+23 to 1,650 in the US, +16 to 821 in Belgium, +28 to 251 in Greece, +33 to 105 in Romania and +16 to 89 in Indonesia). With the acquisition of 485 Delta Maxi stores and a further 7 openings since then, the group is now also present in Serbia (366), Bosnia and Herzegovina (44), Bulgaria (42), Montenegro (22) and Albania (18) – totalling 3,408 stores worldwide.
The group hopes to be able to open 230 stores in 2012, and remodel 200 others. As in its New Game Plan, Delhaize hopes to exceed € 500 million in cost savings by the end of 2012 and targets an annual turnover growth of 5 to 7% by 2014. This aim should be helped by the plans to open 450 new stores in the 2012-2014 period.