Delhaize sees improvement despite declining sales

The last few months have been tough for Belgian retailer Delhaize​, with its US operations in particular suffering from the downturn in consumer spending across the Atlantic.

The company's latest results, for the second quarter of 2003, show that the situation has hardly improved, with the strengthening of the euro against the US dollar pushing sales down by more than 12 per cent, but Delhaize nonetheless said that it was encouraged by its underlying performance and expected to see a steady recovery in sales over the year as a whole.

Second quarter sales were €4.6 billion, a 12.5 per cent decline on the same period a year earlier as a result of the 19.2 per cent decline in the rate of the dollar against the European currency. There was, nonetheless, some good news, with organic sales increasing by 2.8 per cent as the US businesses Food Lion and Kash n' Karry began to turn the corner.

But it was the business outside the US which performed the best, with comparable store sales in Belgium and Greece showing particularly good growth.

Operating profits for the quarter were down 8.7 per cent to €189.7 million, again affected by the exchange rate decline. At constant exchange rates, operating profits would have increased by 9.0 per cent. Net profits, meanwhile, were down to €9.3 million, impacted by the dollar decline and an exceptional charge relating to a change in accounting procedures.

First half sales were 13.2 per cent lower at €9.2 billion, with the exchange rate decline and the closure of 42 underperforming stores to blame for the decline. Organic sales growth was 1.6 per cent in the first half of 2003 due to soft but improving sales at Food Lion and Kash n' Karry and the continued strong sales trends of Delhaize's other operations, with high comparable store sales growth in Belgium, Greece and at Hannaford in the US.

Operating profit for the half was €399.1 million, some 5.7 per cent lower than the previous year, although at constant exchange rates, operating profit would have increased by 13.0 per cent.

Despite these declines, Delhaize remained optimistic for the year as a whole, with the introduction of a new inventory management system at Food Lion expected to lead to significant improvements in margins.

As a result, the company said it expected sales to grow by 2 to 3.5 per cent in the year as a whole at constant exchange rates, an improvement on the 1.5 to 3 per cent originally predicted. Sales for the year should therefore be around €18.8 billion. However, sales at Delhaize America are still likely to be lower than the previous year, dropping by 1 per cent instead of the 2 per cent decline originally predicted.