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Delhaize cuts outlook after U.S. sales disappoint
August 16th, 2010
BRUSSELS – Delhaize Group has cut its operating profit forecast and store opening plans for 2010 after the lingering economic malaise and high unemployment in the Southeastern United States hammered second-quarter sales results at its Food Lion unit.
Management also raised its 2012 cost-cutting target by 200 million euros.
Operating profit from Delhaize’s United States businesses, which include Food Lion, Hannaford and Sweetbay Supermarkets, tumbled 18.8% to $211 million as sales decreased 2.8% to $4.68 billion. First half operating profit in the United States fell 12.8% to $459 million on a 1.6% drop in sales to $9.35 billion.
Comparable-store sales for the American outlets declined 3.6% during the quarter, mainly because of a weak sales performance at Food Lion and the negative impact of Easter’s timing. Management pointed out that Hannaford, based in the Northeast, performed well.
The comp-store sales performance was sharply lower than the 0.8% decrease expected by analysts.
Executives emphasized that the U.S. economic environment remains challenging, particularly in the Southeast and Florida, where consumers continue to cherry pick to find the best prices. "We have seen a very aggressive promotional environment in the United States in the second quarter, with retailers relying heavily on discounted prices to generate traffic," said Pierre-Olivier Beckers, Delhaize’s chief executive officer, during a news conference. "Those who say that the crisis is over certainly are wrong when it comes to consumer goods."
Consequently, Delhaize has reduced its consolidated operating profit guidance for the year to a range of negative 2% to positive 2%. Its prior forecast was for an increase of 2% to 5%.
The company also trimmed its capital expenditure budget to 700 million euros from 800 million and cut its planned store openings worldwide to a range of 82 to 92, down from 102 to 122.