Ahold sees further sales decline

Related tags Ahold United states dollar

Ahold's financial fortunes are going from bad to worse. Already
facing losses of €1bn for 2002, the current year is unlikely to
shape up any better, at least if today's third quarter figures are
to be believed.

Ahold​ seems to be living in its own particular time zone at the moment. Just three weeks after the publication of its 2002 full-year results, the ailing Dutch retail group has today released sales figures for the third quarter of its current year.

Of course, the full-year results had to be restated as a result of the discovery of widespread accounting fraud at a number of the group's units, mostly in the Americas, hence the delay in their final publication, but the current year's figures scarcely make for more encouraging reading.

Ahold is already facing a loss of more than €1 billion for 2002 as a result of the accounting scandal, but it is unlikely to have much opportunity to reduce this mind-boggling figure this year with the current economic climate far from conducive to generating profits.

This is clear from the third quarter figures released today. Net sales for the three months to 5 October were down 7.1 per cent compared to the same period a year earlier at €13.0 billion, impacted significantly by currency exchange rates, in particular for the US dollar.

Sales excluding the currency impact increased by 2.7 per cent, giving Ahold some reason for cheer, however.

The group's US retail operations (Tops, Stop & Shop, Giant fascias) lifted sales in dollar terms by 3.3 per cent to $6.2 billion, but European sales trod water at best, rising by a meagre 0.3 per cent to €3.0 billion. As expected, sales at the flagship Dutch supermarket chain Albert Heijn were lower than the previous year as shoppers deserted the chain in favour of cheaper competitors, but this was partly offset by growth at other units in the Netherlands, Central Europe and Spain.

Net sales at US Foodservice, the division at the centre of the accounting scandal, increased by 5.9 per cent to $4.3 billion, although some 2 per cent of this gain came from businesses acquired last year.

In South America, where Ahold is in the process of selling off most of its operations, sales amounted to €511 million, down 12.8 per cent compared to last year caused by the disposal of Santa Isabel Chile in July of 2003. In Asia, where the group has also made some disposals, sales declined 28 per cent to €78 million due to the sale of most of the assets of Ahold Malaysia and Ahold Indonesia in the course of the third quarter of 2003.

So not exactly pleasant reading for an Ahold management looking for a fresh start after a year of scandal. Admittedly, much of the decline in sales is related to matters beyond Ahold's control - currency exchange or the impact of disposals - and the local currency performances are for the most part encouraging.

But with 2003 figures expected to be marked by further pressure on margins, especially at US Foodservice, and professional fees of lawyers, accountants and other advisors in excess of €100 million, the management will have to come up with something truly revolutionary to restore confidence in the company in 2004.

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