Delhaize, Ahold off to a bad start
groups were attributed to both companies' exposure to the US
market, where the weak dollar has significantly impacted
euro-denominated sales. But neither Delhaize nor Ahold can lay the
blame entirely at the door of currency movements, and both still
have a long way to go to get their business back on track.
Belgian group Delhaize last week announced a 6 per cent drop in Q1 sales to €4.4 billion, a decline which it attributed to a 14.1 per cent weakening of the US dollar. But the company's US operations also took their toll on results in another way - exceptional charges relating to widespread changes at the Food Lion and Kash n Karry chains pushed the group €8 million into the red for the quarter.
But president Pierre-Olivier Beckers preferred to highlight the good organic growth figures for the quarter (2.5 per cent in the US and 3.1 per cent in Belgium) and the steady increase in gross margin compared to the fourth quarter of 2003.
The US business has been a burden on Delhaize's accounts for several years now, underperforming long before the exchange rate situation worsened. A large number of stores have either been closed or revamped, occasionally changing fascia, and while this has helped underlying sales to improve, it has also had a heavy toll on profitability.
Further changes this year - the introduction of a new inventory management system at some chains, the rollout of new store designs - should give added momentum to the company, although same-store growth in the US is likely to be just 1.5 per cent at best.
Meanwhile, Ahold also reported a drop in first quarter figures, of 11.3 per cent to €15.4 billion, affected not only by currency exchange rates but also by the impact of disposals as the group restructured after its accounting fraud scandal last year.
US retail sales were hit by store closures, disposals and the change in the Easter holiday, while the European business was affected by the price war in the Dutch market where Ahold's flagship chain Albert Heijn found the going particularly tough. Exhange rates also impacted the businesses in central and eastern Europe.
Again, the company stressed its underlying growth (of 1.3 per cent, excluding currency and disposals), but with both its US and its European retail operations significantly underperforming during the quarter, recovery at the Dutch group this year is still far from certain.
