Delhaize successful in US, not so in Belgium

Delhaize successful in US, not so in Belgium

Belgian retailer Delhaize has had a mixed first quarter, with good sales in the United States and lower Belgian sales because of increased competition. Profits rose sharply though, from 51 to 80 million euro.

Global turnover up 0.3 %

Delhaize's global turnover reached 5.12 billion euro in the first quarter, 0.3 % higher than the same period in 2013. Without exchange rate fluctuations, the progress was even 2.8 %, but the expensive euro negatively impacted the foreign currency exchange. Another reason for the small growth is the fact that Easter was April in this year, not counting for the first quarter's results.

 

The company had a 4.1 % sales growth in the United States (in local currency) to 4.353 billion dollars and like-for-like sales even went up 4.8 %. A harsh winter helped increase sales for Food Lion. The turnover increase was a mere 0.3 % higher than in 2013 if all calculations are brought into account and with the increased competition, margins dropped from 4 % to 3.6 %.

 

Increased competition pressurizes margins

The increased competition in Belgium was a blow to sales, forcing the company to increase the amount of promotions, with a 0.8 % turnover decrease as a result (1.21 billion euro). Margins dropped from 4.8 % to 3.1 % as increased price investments and an increase in sales and administrative costs cut into the margins.

 

South Eastern Europe had a 2.1 % turnover increase (to 731 million euro), with local currency even pointing to a 3.5 % increase. Greece and Romania moved forward, while Serbia remained in a free fall. Margins for this sector dropped from 2.2 % to 1.9 %.

 

Delhaize managed a 80 million net profit in this first quarter, whereas the same period last year resulted in a 51 million euro net profit. The improvement is not because of operational progress, but came from the 65 million euro it had put aside last year to close American Sweetbay.

 

Plans to open 180 new stores

Delhaize had 3,520 stores at the end of March, which meant it closed 14 stores compared to the end of 2013. The full number still includes the 93 stores in Bulgaria and Bosnia-Herzegovina but these will no longer appear in the numbers for the second and third quarter as they have been sold. Another 119 stores in the United States are for sale, but the company is still keen on another 180 new stores in 2014.

 

To signal its intent, Delhaize points to the 2 new next-gen stores it has opened in Belgium 10 days ago, focused on "buy well, eat well". These stores should have a much better customer experience. The American strategy revolves around "Easy, Fresh and Affordable", a concept which has been introduced in 77 Food Lion stores.

 

Delhaize no longer gives forecasts about the upcoming months.

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