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With its Value Improvement Program price-cut strategy squeezing short-term results, Royal Ahold NV said this morning that its first quarter sales slipped, largely due to a weak dollar and the consequences of a sharp pricing strategy in the U.S. that it hopes will pay off later on.
The grocer said that the VIP strategy is at Stop & Shop and Giant-Landover "is on track. Price investments related to the rollout of the program continue to impact margins and sales, with improvements expected later in the year. We remain vigilant about the economic environment and rising food prices."
Meanwhile, sales dropped 1.3 percent to 7.54 billion euros ($11.6 billion), from 7.63 billion euros in the year-ago period.
Reuters reported that this performance was below an average forecast of 7.8 billion euros in a poll of 10 analysts.
At constant exchange rates, sales were up 6.8 percent, the grocer said.
Its U.S. operations Stop & Shop and Giant-Landover saw sales increase 1.3 percent to $5.1 billion, but the gains were wiped out in the conversion to euros. Identical sales (exactly the same stores in local currency for the comparable period) increased 1.2 percent at Stop & Shop (0.2 percent excluding gasoline net sales) and dropped 1.5 percent at Giant-Landover (1.6 percent excluding gasoline). Ahold said the results were affected by lower pharmacy sales.
Comparable sales (identical sales plus net sales from replacement stores in local currency) increased 1.6 percent at Stop & Shop and decreased 1.2 percent at Giant-Landover.
Likewise, the Giant-Carlisle chain reported a quarterly sales gain of 9.2 percent in dollars, but a 10.2 percent decrease in euros. Identical sales were up 5.7 percent (3.7 percent excluding gas) and comps increased 6.7 percent.