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BRUSSELS, Belgium - Global retailer Delhaize Group said yesterday the market renewal project at star U.S. performer Food Lion will continue in 2007, heading next for Norfolk, Va. and Myrtle Beach, S.C. Delhaize also said Food Lion and Hannaford, its other U.S. star, helped it log strong sales growth in its latest quarter.
The company reported 3.1 percent comparable store sales growth at its U.S. subsidiaries, which besides Food Lion and Hannaford also include Kash n' Karry/Sweetbay. To optimize its global portfolio, however, Delhaize said it will exit the Czech Republic by selling its Delvita operations. The company said several interested buyers have lined up.
In the third quarter of 2006, net sales and other revenues of Delhaize Group increased by 2.8 percent to EUR 4.8 billion. Organic sales growth amounted to 6.0 percent, the strongest growth rate in five years. Operating profit increased by 2.3 percent to EUR 229.4 million.
The contribution of Delhaize's U.S. operations amounted to $4.4 billion, an increase of 5.1 percent over the third quarter of 2005, mainly due to the continued strong sales momentum at Food Lion and Hannaford. During the quarter, comparable store sales increased by 3.1 percent.
"The third quarter was another solid quarter for Delhaize Group," said Pierre-Olivier Beckers, president and c.e.o. of Delhaize Group, in a statement. "The commercial dynamism and high-level of execution in all our banners were reflected in our very strong sales growth."
Beckers continued: "These results fully reflect our strategy of accelerating our top-line growth while maintaining our industry-leading margins, as was confirmed in the good performance of Hannaford, Food Lion, and Alfa-Beta. Disciplined cost management allowed us to offset price investments and keep our operating margin stable in the quarter."
The company attributed the strong sales momentum at Food Lion to effective price, promotion, and marketing initiatives; improved assortment and customer service; the success of the market renewal and concept renewal initiatives; and last year's store closings by Winn-Dixie, a major competitor of Food Lion.
Delhaize said Hannaford's sales were again strong this quarter, supported by targeted promotions and marketing initiatives and a continued positive momentum in the Massachusetts market.
Sales growth at recently converted Sweetbay stores also continued to be good, while sales at non-converted Kash n' Karry stores and in new and converted Sweetbay stores cycling their grand opening were weaker than expected, the company said.
Operating profit at the U.S. operations reached $255.5 million, a 12.9 percent increase over the third quarter of 2005.
In the third quarter of 2006, Delhaize Group opened six new supermarkets in the U.S., including two relocated supermarkets. One Kash n' Karry store was closed.
Delhaize said Food Lion will complete approximately 15 Bloom and one Bottom Dollar Food conversions in the fourth quarter of the year, while approximately 11 Bloom stores will be ready in early 2007. In the Greenville-Spartanburg market, it will open two Bloom and one Food Lion stores in the last quarter of 2006.
For 2007, Food Lion has selected Norfolk, Virginia and Myrtle Beach, S.C. for its next market renewal projects. In Norfolk, Food Lion plans to use a multi-banner approach in renovating 85 stores. In Myrtle Beach, 20 Food Lion stores will receive major renovations.
Six Kash n' Karry stores were converted to the Sweetbay Supermarket concept in the third quarter of 2006. At the end of September, 54 Sweetbay stores were in operation. Fourteen additional Kash n' Karry stores will be converted to the Sweetbay banner by the end of 2006, the company said.
Delhaize Group is a Belgian food retailer present in eight countries on three continents. At the end of September 2006, Delhaize Group's sales network consisted of 2,676 stores.