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Delhaize U.S. business tails off in 1Q
May 5th, 2010
BRUSSELS, Belgium – Delhaize Group saw decreased sales and operating results at its supermarket business in the United States for its fiscal 2010 first quarter.
The Belgium-based food and drug retailer said Wednesday that revenue dipped 0.4% to $4.675 billion during the first quarter from $4.694 billion a year earlier at its U.S. unit, which includes such chains as Food Lion, Hannaford, Harvey's, Bloom, Sweetbay Supermarkets and Bottom Dollar Food.
Comparable-store sales for the U.S. business fell 1.8%, according to Delhaize.
The company noted that first-quarter results reflect the impact of retail food deflation of 1.6%, compared with inflation of 4.1% a year earlier. In addition, the retailer cited the impact of major price reductions begun in January, mostly at Food Lion, as evidenced by a 160-basis-point gap between its retail price and cost-price inflation. "After more than two years of negative though improving volume trends, real growth was almost flat for the quarter," the company stated.
On the plus side, Delhaize said that the number of items per customer transaction in the U.S. unit increased during the first quarter, mainly driven by Food Lion, although Hannaford continues to see a rise in the number of transactions. Private brand penetration also increased in the quarter.
Meanwhile, operating profit in the 2010 first quarter declined 6.9% to $248 million from $266 million a year ago, and the operating margin came in at 5.3% of revenue, down from 5.7% in the prior-year period. Gross margin also decreased due to price cuts at Food Lion and Hannaford, partly offset by better inventory results, the company said.
"Despite lower sales leverage, disciplined cost management at all our U.S. operating companies resulted in a decrease of selling, general and administrative expenses as a percentage of revenues," Delhaize stated in its first-quarter report. "Operating expenses decreased mainly as a result of lower payroll due to productivity efforts, deliberate cost reductions and adjustments to restructuring and store closing provisions."
At the end of March, Delhaize operated 1,596 supermarkets in the United States, down from 1,607 at the close of 2009. The company said it expects to have a total of 1,640 to 1,645 U.S. stores by the end of this year.