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BELGIUM -- Global retailer Delhaize Group, the parent company of U.S. banners including Food Lion, Sweetbay, and Hannaford, said yesterday that its U.S. stores experienced a 3.4 percent comparable store sales growth in the second quarter -- the best performance in five years. The company also saw a 6.8 percent increase in total sales and a 23.1 percent boost in profit.
Based on the solid momentum, the company raised its comparable store sales growth guidance for Delhaize U.S. to 2.5 percent to 3.0 percent (compared to a previous guidance of 1.5 percent to 2.0 percent).
"Delhaize Group realized a very strong performance in the second quarter of 2006," said Pierre-Olivier Beckers, president and c.e.o. of Delhaize Group, in a statement. "Our sales growth was outstanding." Beckers also noted that the company's Belgian business has recovered well since the beginning of the year.
"Our results this quarter can be tied directly to thoughtfully planned and well executed initiatives within the group, such as assortment optimization, market renewals, acceleration of the store opening program, and our recent fill-in acquisitions," noted Beckers.
In the second quarter of 2006, the contribution of the operations in the United States to the sales of Delhaize Group amounted to $4.4 billion, an increase of 5.7 percent over the second quarter of 2005, mainly due to the strong sales performance at Food Lion and the improved sales trend at Hannaford. The U.S. sales of Delhaize Group grew by 4.4 percent in the first six months of 2006.
During the second quarter of 2006, comparable store sales, excluding the effect of the timing of Easter, increased by 3.4 percent. Easter fell in the second quarter of 2006 and the first quarter of 2005. Including the effect of Easter, comparable store sales growth was 4.1 percent.
Delhaize said the strong sales momentum at Food Lion comes from effective price, promotion, and marketing initiatives; improved assortment and customer service; the success of the market and concept renewal initiatives; and last year's store closings by a major competitor, Winn-Dixie.
Following a softer first quarter due to weaker consumer spending, Hannaford's sales grew solidly in the latest quarter, supported by effective promotions and marketing initiatives and a solid sales uplift in the former Victory stores, Delhaize said.
Harveys and Sweetbay continued to perform well in the quarter, while the non-converted Kash n' Karry stores suffered from negative sales trends. Delhaize said 21 Kash n' Karry stores were converted to the Sweetbay Supermarket concept in the second quarter. At the end of June it was operating 48 Sweetbays, almost half of its Florida presence. The remaining 22 stores in the Tampa/St. Petersburg market will be converted to the Sweetbay banner by the end of the year.
As for the Washington, D.C. market, where Food Lion is rapidly rolling out store renewals, Delhaize estimated that it will complete 25 Bloom, 11 Bottom Dollar Food, and seven Food Lion conversions in the second half of the year, while approximately 15 Bloom stores will be ready in the early part of the first quarter of 2007 due to delays in obtaining building permits.
In the Greenville-Spartanburg, S.C. market, meanwhile, two Bloom and two Food Lion stores are expected to open later this year.
Delhaize Group continues to expect capital expenditures (excluding finance leases) of approximately EUR 770 million at identical exchange rates, including approximately $700 million for the U.S. operations of the group.
The company also highlighted its performance in the first six months of 2006, which included the following:
-- Organic sales growth of 4.5 percent;
-- Net sales and other revenues growth of 9.0 percent to EUR 9.7 billion;
-- An operating profit increase of 11.2 percent to EUR 456.9 million;
-- Net profit from continuing operations up by 21.6 percent; and
-- Group share in net profit increase of 21.4 percent to EUR 191.9 million.