Delhaize turns European sales around
first-quarter domestic sales and strong growth in Greece, following
a tough 2005 on the European retail scene.
Belgium's second largest food retailer saw a company-wide organic sales rise 3.3 per cent, with Greece delivering the largest sales jump to 9.6 per cent. Total sales hit €4.3bn (£2.92bn) for the quarter.
Improved performance in the Greek and Belgian markets was attributed to expansion strategies that increased market share. During the quarter Delhaize acquired Cash Fresh in Belgium and launched several new Greek stores.
Aggressive Belgian price cuts, coupled with a comprehensive marketing campaign, also worked to boost sales and banish its reputation as an expensive retailer.
Overall operating profit increased by 11.7 per cent to €228.6m, supported by a 9.1 per cent higher average US dollar exchange rate.
"We are pleased with these first quarter results," said Pierre-Olivier Beckers, Delhaize CEO. "Our sales momentum continued to be strong, particularly at Food Lion, our largest company. In Belgium, first quarter sales were encouraging, as we showed accelerating growth."
But Delhaize's historically solid US trading ground, where the firm makes around 70 per cent of its profits, showed a marginal like-for-like sales growth of 1.7 per cent - even though the company opened new stores and remodelled existing ones during the quarter.
The retailer opened eight new US supermarkets, including six under its Hannaford banner, and acquired the Victory chain in Massachusetts.
The flagship Food Lion banner opened a Bottom Dollar test store to tap growing demand for low-cost food.
Food Lion is now preparing for its South Carolina launch and a Washington DC store makeover programme. Around 80 Food Lions will be remodelled in the state, and will reopen under different names.
"These projects and our continued focus on executional excellence, give us full confidence in the achievement of our plans for 2006," Beckers said.
The quarter's success story, though, has been the jump in domestic sales, following a tough 2005.
Late last year Delhaize was forced to cut 1,000 prices in Belgian stores as it became embroiled in a fierce price war with discounters and foreign rivals.
French rival Carrefour, which operates hypermarkets and supermarkets in Belgium, triggered deflationary activity by initiating a series of price cuts and promotions. This, along with the increasing presence of discount retailers such as Aldi, Lidl and domestic rival Colruyt, forced Delhaize to act.
