Delhaize’s Q2 U.S. Comps, Revenue Up

Delhaize Group reported second-quarter revenue growth of 3.7 percent, while comparable-store sales grew 3.3 percent in the United States, despite dipping -1.2 percent in Belgium, a circumstance that the Brussels-based retail conglomerate partly attributed to disruption in certain stores caused by the June announcement of Delhaize’s Transformation Plan, which aims to increase efficiency and lower costs at the company.

Delhaize America experienced a 2.2 percent increase in retail inflation during the quarter, but revenues at Delhaize Belgium were flat in spite of modest retail inflation of 0.9 percent, according to the company. Gross margin was 24 percent of revenues, down 25 basis points at identical exchange rates. Higher price investments and promotions and higher logistic costs at Delhaize Belgium were cited as the main reasons for the decline.

"Our operating performance in the second quarter was in line with our expectations," said Delhaize Group President and CEO Frans Muller. "In the U.S., comparable-store sales growth remained strong, driven by momentum at Food Lion and Hannaford. Our U.S. underlying operating profit began to stabilize as we started to cycle last year’s price investments."

For the first half of 2014, Delhaize Group's revenues increased 3.2 percent at identical exchange rates. In the United States, revenue growth in local currency was 4.4 percent and U.S. comps were up 4 percent. Meanwhile, Delhaize Belgium’s revenues fell 0.4 percent and its comps declined by 1 percent, although revenues in southeastern Europe rose 4.4 percent.

Gross margin for the first half of 2014 was 24 percent of revenues, decreasing 42 basis points. According to the company, lower gross margin at Delhaize Belgium and price investments at Delhaize America were partly offset by a higher gross margin in southeastern Europe.

Easy, Fresh & Affordable

For the second quarter, U.S. revenues increased 4.7 percent to $4.4 billion. Volume growth for Delhaize America was lower than in the previous quarters, with the company noting the aforementioned significant rise in retail inflation. The Easy, Fresh & Affordable strategy, which seeks to enhance the shopper experience through expanded product variety and associate training, while retaining the low prices customers expect, is set to roll out to 29 Food Lion stores in the Wilmington, N.C., region at the end of August, with a group of 48 stores in Greenville, N.C., area to follow in November. The program's rollout, which will continue its robust expansion throughout the fall, has thus far seen success, and is likely a contributing factor to the company's steady performance.

 rollouts, which as far as what they’ve been able to do at Food Lion (Fresh, Easy & Affordable isn’t at all stores yet) seems to be successful

Underlying operating profit dipped 0.2 percent to $162 million, leading in an underlying operating margin of 3.6 percent, versus last year’s 3.8 percent. Delhaize attributed the decrease primarily to a slightly lower gross margin and slightly higher SG&A expenses.

During the first half of 2014, U.S. revenues rose 4.4 percent in local currency, while underlying operating profit declined 4.3 percent to $317 million and the underlying operating margin was 3.6 percent, down from 3.9 percent in the year-ago period.

As part of its full-year outlook, Delhaize Group plans to open 180 new stores and during the second half of the year, the company will focus on further testing of Easy, Fresh & Affordable at 77 Food Lion, in combination with an in-depth assortment review across the banner, and the implementation of the Transformation Plan in Belgium.

The company added that it expects Food Lion and Hannaford keep seeing positive comp-sales growth in quarters to come.

Delhaize Group operates 3,377 stores in eight countries on three continents.