Delhaize sees sales grow, but profits melt

Delhaize sees sales grow, but profits melt

Belgian supermarket chain Delhaize has had an excellent 2012, as sales rose by 7.7% to 22.7 billion euro. Performances were especially good in South-Eastern Europe and Asia and the stronger dollar helped to improve the American results. Profits on the other hand dropped by 18% due to price wars and one-off expenses.

Christmas sales boosts Belgian results

In its home market Belgium, Delhaize’s sales grew 1.6%: twice the growth of the previous year. In the fourth quarter the chain even had a growth in sales of 2.4%, mainly thanks to a successful holiday season. This growth was mainly realised through the opening of new stores, as comparable sales growth was only 0.6%.

 

Sales South-Eastern Europe 30% higher

In Asia and South-Eastern Europe Delhaize took a giant step forward as sales rose by a massive 29.9%, mainly thanks to the acquisition of the Serbian Maxi chain. Another area of success was Greece, where the Alfa Beta stores are performing admirably - despite the current economic crisis in the country.

 

Less successful were Albanian activities though: they will be hived off this year and have already been removed from the books. The buyer of the Albanian stores has not yet been disclosed, nor has the fee concerning the sale.

 

US: ‘Best quarter since 2006’

Delhaize’s biggest market, the United States, doesn’t paint such a pretty picture as the American division, responsible for two thirds of sales, dropped by 2.2% in dollars (2.1% in the last quarter). This drop is mainly caused by the closing of 126 locations over the previous year. Because of the stronger dollar though, the American branch was able to add a rise of 5.9% in euro (1.9% in the last quarter) to the books.

 

The best news came from Food Lion that, after its repositioning on the market, recorded excellent results. Delhaize did not disclose any specific figures, but CEO Pierre-Olivier Beckers did say Food Lion had “its best quarterly performance since 2006.”

 

Profits melt as stores close

With the complete profit reports only due in March, Delhaize only was able to state that 'the preliminary unaudited underlying operational profit' dropped by 17.5% because of 400 million euro worth of one-off expenses. This drop was foreseen, as the group itself had predicted a drop in profits between fifteen and twenty percent.

 

The Serbian Maxi chain is one of the main reasons for the drop: changing circumstances on the market forced Delhaize to lower its estimated value by 245 million euro. In the US the group took a hit of 130 million dollar, mainly because of a number of stores closing. Definitive earnings will be made public on March 7th.

 

Satisfied CEO

CEO Beckers was satisfied: “As a result of our cost control and capital allocation discipline, in 2012 we generated free cash flow above €600 million, exceeding our previously announced target of €500 million. This strong cash flow performance provides us the means to continue our repositioning efforts, to strengthen our store network and to further deleverage the balance sheet. Our preliminary unaudited underlying operating profit is within the guidance range provided in May 2012.”

 

“We remain determined to accelerate the transformation of our business. In 2013, our focus will be on further strengthening our store brands, accelerating revenue growth, maintaining strict cost control and generating free cash flow.”

 

Large growth in Romania

The Delhaize Group is active in ten countries, with the lion’s share of their income coming from the US and Belgium. Both countries combined accommodate 2500 of the group's 3452 stores. In the fourth quarter of 2012 64 new stores were opened, of which 40 came in Romania.

 

The Delhaize group also has 363 stores in Serbia (Maxi), 268 in Greece (Alfa Beta), 193 in Romania (Mega Image), 103 in Indonesia (Super Indo) and a few dozen Maxi stores in Bulgaria, Bosnia-Herzegovina, Montenegro and Albania. That last country currently has 23 stores, but will soon be cut from the ranks.   (YVL)

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