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Current Position:Home » News » Marketing & Retail » Retail » Topic

Delhaize profit jump raises turnaround hopes on sales and margins

Zoom in font  Zoom out font Published: 2013-04-23  Origin: Reuters  Authour: Philip Blenkinsop and Mark Potter  Views: 20
Core Tip: Belgian grocer Delhaize posted a rise in operating profit for the first time in six quarters, raising hopes its cost cutting and investment drive are starting to boost both sales and margins.
Belgian grocer Delhaize posted a rise in operating profit for the first time in six quarters, raising hopes its cost cutting and investment drive are starting to boost both sales and margins.

Shares in the group, which makes almost two thirds of its sales in the United States, jumped over 11 percent on Monday to their highest for 18 months.

Retailers across Europe are mostly struggling as disposable incomes are squeezed by rising inflation, muted wages growth and austerity measures, while in the United States cut-throat competition has driven down grocery prices.

Delhaize, which operates the Food Lion, Hannaford and Bottom Dollar Food chains in the United States, has responded by cutting costs, reducing prices and closing some stores, while revamping others.

The group said its underlying operating profit rose 13.7 percent to 214 million euros ($280 million) in the first quarter, beating analysts' forecasts by about 20 percent.

It also predicted a full-year profit of 775 million euros, below the 810 million achieved in 2012, but better than many analysts' expectations.

"Delhaize is valued quite cheaply. If the market concludes that they have cleaned up their act, you can expect such share price jumps," said analyst Robert-Jan Vos at ABN Amro.

At 1030 GMT, Delhaize shares were up 11.3 percent at 47.50 euros, the biggest rise on the STOXX 600 Index of leading European shares.

Delhaize said its underlying operating margin in the United States rose to 4.2 percent from 3.7 percent in the same period last year, while its margins in Belgium climbed to 5.1 percent for 4.6 percent.

The group is among the first grocers to report first-quarter figures.

In 2012, Delhaize had an underlying operating margin of 3.6 percent, above the 2.8 percent reported by French peer Carrefour but below the 4.3 percent of Dutch group Ahold , which also has a big presence in the United States.

Delhaize unexpectedly published unaudited figures on Monday at the same time as postponing a capital markets day until later in the year. The group said it wanted to provide a more comprehensive update on its long-term strategy.

It will still publish full first-quarter results on May 8, as planned.

 
 
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