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

Tough Belgian market weighs on Delhaize profits

Zoom in font  Zoom out font Published: 2014-05-08  Views: 2
Core Tip: Belgian supermarket operator Delhaize posted a first-quarter core profit slightly below expectations as accelerating sales growth in the United States was undermined by a slowdown in its Belgian operations.
Belgian supermarket operator Delhaize posted a first-quarter core profit slightly below expectations as accelerating sales growth in the United States was undermined by a slowdown in its Belgian operations.

Delhaize, which makes about 60 percent of its revenues in the United States where it operates the Food Lion and Hannaford supermarkets, said sales at U.S. stores open for at least a year increased by 4.6 percent. This was far better than the 3.3 percent expected in a Reuters poll.

In Belgium, where the group cited tough competition, same store sales fell by 0.8 percent, below the 0.6 percent growth expected.

Delhaize shares fell as much as 4.2 percent on Tuesday, but were down a modest 0.5 percent at 0915 GMT. The STOXX European Retail Index was flat.

For the group as a whole, operating profit fell 5.7 percent in the first quarter to 156 million euros ($217.35 million), just below the 159 million expected in a Reuters poll of five analysts.

While not giving a precise outlook for the full year, the group's Chief Financial Officer said that sales trends continued into the second quarter and that he felt confident with analysts' 2014 expectations.

"Our expectations are precisely in line with the market consensus so you derive for yourself the underlying operating profitability we are expecting," Pierre Bouchut told a conference call.

A StarMine consensus of 21 analysts currently expects operating profit to fall by 3.3 percent to 728 million euros while the SmartEstimate, which weights analysts by their previous track record, sees a 4.1 percent fall to 722 million.

In the Belgian market, Delhaize competes with German hard discounters Aldi and Lidl as well as Belgian group Colruyt and France's Carrefour. Most recently Dutch supermarket group Ahold has started to expand in the country.

"Ahold is beginning to gain ground from historical players and once it reaches decent size, its excellent price positioning is likely to do a lot of damage," analysts at Natixis wrote in a note to clients.

The group added that because it had to offer lower prices and promotions to lure customers to its stores, underlying operating profit in Belgium decreased by more than a third.

In the United States, profits fell by 8.2 percent as a result of a low-price strategy and costs related to the harsh winter weather, such as clearing snow from driveways and parking lots in the quarter.

Delhaize said it had not yet experienced much pressure from U.S. supermarket giant Kroger, which recently acquired the Harris Teeter chain which operates in markets such as North Carolina and Virginia, where Delhaize's Food Lion is also present.

 
 
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