Ahold sales fall again

Related tags Ahold Eastern europe Currency

Ahold's management remains stoically bullish about the Dutch
retailer's chances of recovering from the double whammy of fraud
and poor performance, but the company's latest set of results show
that the journey is likely to be long and hard.

Second quarter sales dropped by 4.8 per cent to €12.3 billion, affected by disposals and the impact of currency exchange rates, although the company stressed that excluding these factors underlying growth was a modest but encouraging 3.1 per cent.

Ahold has been brutal in shedding those units which had no long term future, withdrawing entirely from Asia and Latin America, reducing its US operations and seeking a buyer for its Spanish business (with the rumour this week that Eroksi is the leading retail contender for the stores).

This has helped reduce its exposure to much of the exchange rate fluctuation which had taken a major toll on the company's results even before the discovery of accounting fraud in February 2003, but there are still a number of countries where growth is being pegged back by the cost of translating sales and profits into euros.

The US is one example, where retail sales were only 0.5 per cent higher in local currency terms, at $6.3 billion, and fell 4.2 per cent when translated into euros. European sales, meanwhile, were unchanged at €3.1 billion, with store openings in eastern Europe offset by the weak currencies there, in particular in Poland.

Ironically given that it was the source of the fraud which contributed so importantly to Ahold's woes, it was the US Foodservice unit which was the star performer during the quarter, offsetting a poor performance from the European foodservice unit and leaving total foodservice sales some 2.1 per cent ahead at €3.9 billion.

Ahold clearly has a long way to go before it gets back on track. Even though it has disposed of most of its most troublesome units, the ones which remain still need a great deal of work: the US business should improve once the economy there picks up, but only if the reorganisation currently underway there is managed properly; the Dutch business continues to suffer from a high price image; joint ventures in Scandinavia and Portugal have failed to live up to their potential; and eastern Europe remains a land of opportunity, but only for companies with the right business model and the flexibility to respond to changing market demands.

Whether the Ahold management's optimistic stance is empty rhetoric or a true belief in its ability to turn itself around remains to be seen, but whatever the answer, it is unlikely to become clear for some time - at least until the restructuring programme has been completed and the company can completely focus its attentions on the day-to-day business of simply selling food.

Related topics Market Trends

Related news

Follow us


View more