Delhaize Belgium's restructuring has pushed operational quarterly profit 51.3 % lower, but there is also good news as last year's loss (for the whole group) is turned into a profit once again and there is a deal with Aldi to sell Bottom Dollar Food.
Group returns to profit
Delhaize Group's third quarter profit was 109 million euro, a huge improvement on the 81 million euro loss from last year. The difference can be attributed to the depreciation of the Serbian activities (worth some 200 million euro) in last year's balance.
Group turnover grew 3.1 % to 5.46 billion euro, up from 5.3 billion euro last year. A 5.7 % turnover increase in the United States, which represents 60 % of the group's total turnover, and a 3.7 % turnover increase in South East Asia were major contributors.
Belgian profit halved
Belgian turnover dropped 4.2 % to 1.2 billion euro, but the group managed to offset that decline elsewhere. A weak summer, fewer marketing efforts and many concerns raised by the announced transformation plan have all had their effect according to the board. The Belgian branch will close 14 supermarkets (out of 138) and scrap 2,500 positions.
This has not been beneficial for its operational profit, tumbling from 35 to 16 million euro. Weak sales performances and price drops for fruit and vegetables have impacted profit quite severely.
"No negotiations yet"
Delhaize believes Belgium will be in this same situation for some time and has mentioned it "will probably have a significant impact" on the fourth quarter results. Work interruptions in the supermarkets and several blockades have hindered Delhaize's Belgian operations over the past few weeks, leading to empty shelves in several supermarkets.
CEO Frans Muller admitted that "the conditions have worsened" in the fourth quarter, but added "the company remains committed to creating long-term sustainability and is in talks with the social partners to achieve that."
Those talks are not going extremely well: the board has talked to labour unions, but they have not exactly reacted positively afterwards. "What we saw was even worse than what we had already heard, particularly regarding the staff's flexibility and versatility", Myriam Delmée (socialist labour union) said. They will meet the board once more on 13 November.
Aldi buys Bottom Dollar Food
Delhaize has managed to offload its 66 Bottom Dollar Food stores, all located in and around Philadelphia and Pittsburgh. Discounter Aldi will acquire all stores for some 15 million dollars (12 million euro), while keeping the current leasing contracts.
Delhaize Group estimates the sale will result in a 140 million euro depreciation, but the sale of the American discounter should help "simplify the Group's activities, while also increasing the borrowing capacity and create shareholder value". The deal should be finalized in the first quarter of 2015.
Delhaize has also reopened 31 American Food Lion stores in August as part of its "Easy, Fresh and Affordable" strategy. Another 45 stores will open in the upcoming week.