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AMSTERDAM -- Retail conglomerate Royal Ahold NV here reported that first-quarter profit increased 76 percent as a result of improved earnings at its U.S. Foodservice division in Columbia, Md. Net sales for the company were 14.1 billion euros (US $17.9 billion ), an 8.6 percent increase over last year. Excluding currency impact, net sales rose 2.1 percent.
Operating profit at U.S. Foodservice nearly quadrupled to $87 million. Last year Ahold made the decision to split the division into two businesses, one dealing with hospitals and schools, the other with fast-food restaurants. This new business strategy is offsetting sluggish sales at the company's supermarkets, which are contending with increased competition from big-box retailers such as Wal-Mart.
At the Stop & Shop/Giant-Landover arena, net sales decreased 0.8 percent compared with the year-ago period, with identical sales falling 1.3 percent at Stop & Shop and 2.5 percent at Giant-Landover. Operating income was down $24 million to $283 million as a result of higher utility and fuel costs, and their effect on consumer behavior.
The Giant-Carlisle/Tops arena saw net sales fall 5.6 percent vs. last year, but rose 2.2 prcent excluding the impact of stores divested last year. While identical sales at Giant-Carlisle increased 2.9 percent (1.5 percent excluding gasoline net sales), they plunged 6.5 percent (7.3 percent excluding gas net sales) at Tops. The arena's operating income decreased $2 million to $49 million from the year-ago period. According to Ahold, performance across the arena varied widely, with Tops stores in northeast Ohio remaining weak.
The company is forecasting a rise this year in the gross margins at its U.S. divisions in the wake of the sale of its financially struggling Bi-Lo/Bruno's stores and inventory reductions.
In a statement president and c.e.o. Anders Moberg noted: "In the first quarter, retail performance was mixed. We saw encouraging retail performance from Albert Heijn, Giant-Carlisle, and ICA. The competitive environment continued to be challenging for Stop & Shop/Giant-Landover, and conditions remained difficult in Central Europe and at Tops, especially in northeast Ohio. U.S. Foodservice performed well as the new strategy takes effect. At the Stop & Shop/Giant-Landover Arena, work continued towards the progressive implementation of its value improvement program later this year. At a group level, the review of underperforming assets and the strategic review to drive and fund identical-sales volume growth across our global retail businesses have started and will be completed in the fall."