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Delhaize America has unveiled key strategic actions to improve its U.S. portfolio, among them the closure of 113 underperforming Food Lion stores, mainly in markets where the banner has the lowest store density; retiring the Bloom banner altogether; the conversion 64 Bloom and Bottom Dollar Food stores in Maryland, North Carolina and Virginia to Food Lion stores; closing seven underperforming Bloom stores and six underperforming Bottom Dollar Food stores in overlapping Food Lion markets; converting one Food Lion store in Florida to a Harveys store; discontinuing operations of its Clinton, Tenn., distribution center, and ramping up the rollout of the Food Lion brand strategy in another 600 to 700 stores.
“Today’s actions will continue to solidify our U.S. operations and enable our company to focus on our successful brand strategy repositioning at Food Lion and the expansion of Bottom Dollar Food in new markets,” explained Ron Hodge, CEO of Salisbury, N.C.-based Delhaize America. “While these were difficult decisions given the impact on our associates, customers and communities, we believe these actions will enable us to better serve our customers in our markets with high density, while positioning the company for future growth.”
All affected stores are scheduled to close their doors within 30 days, with store conversions set to begin immediately. As a result of these actions, about 4,900 associates will lose their positions. Delhaize will provide severance to eligible employees, as well as working with government officials to help with transition support. Associates can also apply for open positions within the company. Most associates at converted stores will continue to work at those locations.
After shuttering the 113 stores and converting a Lake City, Fla., location to a Harveys market, Delhaize America will no longer operate the Food Lion banner in Florida, although its Sweetbay and Harveys banners will continue in the state. The company is boosting its density of Food Lion stores in other states by converting Bloom and Bottom Dollar Food stores to Food Lion in Maryland, North Carolina and Virginia. Following these conversions, the banner will operate in 1,127 stores in 10 states.
“Food Lion is focused on repositioning our business for future growth,” noted Food Lion President Cathy Green Burns. “By closing underperforming stores, we will continue to position Food Lion for success, especially in light of our brand strategy results. We are very pleased with the reaction from our customers on the implementation of our new brand strategy work, which includes being recognized as a price leader, making our stores easier to shop, offering the greatest value in private brands and providing fresh produce. However, we also determined the most successful markets for these investments are areas where we have strong store density or high market share. As we move forward with implementing our strategy this year, Food Lion will launch its next market this quarter and expects to be substantially complete by year-end.”
Twenty-two Bottom Dollar Food stores in Maryland, North Carolina and Virginia will become Food Lion stores, and six underperforming Bottom Dollar stores in North Carolina and Virginia will close, so that Delhaize America can focus on the markets presenting the greatest growth opportunity for the banner, including Philadelphia, Pittsburgh and Youngstown, Ohio. The stores being closed or converted are Bottom Dollar’s larger-format stores. Going forward, Bottom Dollar Food will operate smaller-format stores of about 18,000 square feet, which have proved to be more successful formats for the banner.
Additionally, the banner will bow 14 stores in Pittsburgh and Youngstown, Ohio, by the end of the first quarter, and anticipates opening another 10 to 15 stores by year-end in its new markets. Delhaize America further plans to continue growing the banner by opening several hundred Bottom Dollar stores over the next five years.
“Bottom Dollar Food is a strong, emerging banner that is continuing to grow and be successful in our new markets,” said Meg Ham, the division’s president. “Customers have been very receptive to our discount-grocer model, which includes a smaller format, the most popular national brands, a wide selection of private brand products, and fresh produce and quality meats at unbelievably low prices.”
The decision to retire the Bloom banner was made because, according to Delhaize America, “[W]e believe the stores will better meet customer needs through low prices and quality products.”
The company is discontinuing the Clinton DC operations because of the lower number of Delhaize America stores, but will maintain a transportation facility at the location to support its transportation network. Operations will discontinue during the first quarter of this year as the company scales back operations at the location and shifts distribution to other locations, primarily to facilities in Elloree, S.C.; Salisbury and Dunn, N.C. With the closing of the Clinton DC, Delhaize America will have 11 distribution centers across its network, while still maintaining additional capacity for future growth.
In a preliminary revenue report of 2011, Delhaize said that U.S. operations generated revenues of $19.2 billion, an increase of 2.2 percent over 2010, while comparable-store sales grew 0.7 percent. The report noted that economic conditions were challenging during the year, particularly in the Southeast, with food inflation especially high in the second half of the year.
During the fourth quarter of 2011, the revenue contribution of Delhaize America rose 1.0 percent from 2010, at $4.8 billion, as comps dipped 0.4 percent. The company’s U.S. operations saw a deterioration of the volume trends starting toward the end of the third quarter, and continuing in the fourth quarter. Inflation stayed high, and combined with low consumer confidence, led to greater competitive activity and lower consumer spending, Delhaize America reported.
At Food Lion, stores in the banner’s two “Phase One” markets (Raleigh, N.C., and Chattanooga, Tenn.) continued to perform well since their launch in early May 2011, especially in Raleigh. “The trends in customer visits and number of items sold continue to outpace the rest of the Food Lion network, resulting in positive comparable-store sales growth fueled by the additional price investments in these stores,” Delhaize America noted.
The company also noted that Bottom Dollar stores in the Philadelphia market experienced solid revenue growth and high comps, reaffirming company confidence in the banner. In December, the company revealed plans to open 450 stores in its newer operations, including "hundreds" of Bottom Dollar loations over the next five years.
Brussels-based parent company Delhaize Group is additionally closing 20 underperfomeing stores in southeast Europe, including small convenience stores, supermarkets and hypermarkets.
In reaction to the news of the store closures, United Food and Commercial Workers (UFCW) Local 400 President Tom McNutt said that the reason for them was that "[c]orporate executives in Brussels viewed the U.S. as if it were a third-world country -- as a place where they could make a quick buck by driving their labor costs down to the lowest possible level. What they discovered is what they already knew in Europe -- that a fairly compensated, fully empowered, well-treated workforce provides the stability, productivity and quality service that are essential to long-term success in the retail grocery industry."
McNutt went on to caution Ahold USA, whose parent company is based in Amsterdam, not to follow the same "failed Food Lion model" with its Martin's stores in Richmond, Va. Landover, Md.-based Local 400, which represents 40,000 workers in Maryland, Virginia, West Virginia, the District of Columbia and Tennessee, is currently engaged in contract negotiations with Ahold USA's Giant-Landover division and Safeway.
Delhaize America operates more than 1,600 stores in 16 states in the eastern United States under the Bottom Dollar Food, Food Lion, Harveys, Hannaford Supermarkets, Reid's and Sweetbay banners. The company employs about 107,000 full-time and part-time associates.