Ahold struggles in first quarter

Related tags Cent Organic growth United states dollar Ahold

Ahold's troubles continued in the first quarter of the current year
with sales dropping 11 per cent compared to 2002, mainly due to
exchange rate declines. But organic growth at most units was solid,
a small ray of hope for the increasingly beleagured group.

Dutch retail group Ahold​ has reported an 11.3 per cent decline in sales for the first quarter of the year to €17.4 billion, due mainly to exchange rate declines and the ongoing uncertainty over the company's future.

But Ahold preferred to put a brave face on its results, highlighting the 2.7 per cent increase in organic sales (excluding the impact of currency exchange) during the three-month period.

In the US, where Ahold's US Foodservice unit has been embroiled in an accounting scandal which cost two more executives their jobs earlier this week, the company reported a 1.5 per cent decline in sales to $5.3 billion (€4.7bn). However, the US retail operations improved sales by 4.8 per cent to $8.3 billion.

In Europe (where the group operates stores in the Netherlands, Spain and Central Europe), sales rose 2.6 per cent to €4.1 billion, and organic sales growth, excluding currency impact, amounted to 2.7 per cent.

Ahold has recently announced plans to divest the majority of its South American business units (which have been hardest hit by currency devaluations over the last year), but first quarter figures from the operations in Brazil, Argentina, Chile, Peru and Paraguay were encouraging.

Sales rose 42.7 per cent to €580 million there, helped admittedly by the acquisition of the outstanding shares in Argentine unit Disco Ahold International Holdings (which was a joint venture in the first quarter of 2002). But even without the impact of the Disco deal, the South American operations continued to recover, posting organic sales growth of 12.1 per cent in the first quarter, excluding currency impact.

In Asia, where Ahold is also selling off assets to try and reduce its debt burden, sales were down 10 per cent to €109 million. But the stores in Thailand, Malaysia and Indonesia posted organic growth of 7.6 per cent during the quarter, again excluding the currency impact.

Ahold's future is still very much in the balance, and while the moves to sell units in South America and Asia - where exposure to currency fluctuations is greatest - will help, many observers remain sceptical about the company's chances of survival. The international retail sector is becoming increasingly cutthroat, and there are too many rivals with major growth pretensions (and the financing to match) to believe that Ahold will come through this difficult patch unscathed.

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