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Despite an inhospitable economic environment and considerable price investments primarily at the Food Lion chain that contributed to a 0.4 percent decline in its U.S. revenues, Delhaize Group president and CEO Pierre-Olivier Beckers declared that the Brussels-based retail conglomerate was “pleased” with its first-quarter results. Delhaize posted revenue growth of 1.7 percent at identical exchange rates, which the company put down to the strong performance of its Belgian, Greek, Romanian and Indonesian stores.
Beckers wasn’t counting out its American operations, however. “Our volume trends in the U.S. continued to improve, which is an early sign that our customers are reacting positively to our price reset,” he noted. Food Lion began implementing the price-reduction program, which encompasses thousands of items throughout the store, in January.
The initiative is “in line with our strategic commitment to reinforce our value leadership in all our markets and to focus our price positioning on the market’s price leader, as outlined in our New Game Plan,” according to Delhaize. “In the U.S., the number of items per customer transaction further increased during the first quarter of this year, mainly driven by Food Lion. Hannaford continues to see growth in the number of transactions. Private brand penetration continued to increase compared to last year.”
In the first quarter of 2010, operating profit fell 6.9 percent in local currency and the operating margin came to 5.3 percent of revenues, vs. 5.7 percent in the first quarter of 2009. Gross margin declined because of price investments at Food Lion and Hannaford, partly offset by improved inventory results at Food Lion, Hannaford and Sweetbay Supermarket. In spite of lower sales leverage, tight cost management at all three U.S. operating companies led to decreased selling, general and administrative expenses as a percentage of revenues, noted Delhaize. The company attributed lower operating expenses chiefly to lower payroll as a result of productivity efforts, deliberate cost reductions, and adjustments to restructuring and store closing provisions.
At the end of March, Delhaize had 1,596 U.S. supermarkets.