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    Delhaize Turns in Sales and Profit Gains for Q4 and '05

    BRUSSELS, Belgium -- Thanks to ongoing cost-cutting and new in-store initiatives at its U.S. banners, the Delhaize Group here saw 5.3 percent sales growth and a net profit increase of 66.7 percent for the fourth quarter. For the year, sales grew 4.2 percent, while net profit was up 23.4 percent.

    BRUSSELS, Belgium -- Thanks to ongoing cost-cutting and new in-store initiatives at its U.S. banners, the Delhaize Group here saw 5.3 percent sales growth and a net profit increase of 66.7 percent for the fourth quarter. For the year, sales grew 4.2 percent, while net profit was up 23.4 percent.

    President and c.e.o. Pierre-Olivier Beckers said in a statement the company plans to make 2006 its fourth consecutive year of sales growth by opening more stores while continuing its focus on cost control.

    In 2005, the contribution of Delhaize's U.S. operations totaled $16.6 billion, an increase of 4.4 percent over 2004 due to a comparable store sales increase of 1.1 percent, more store openings, and the inclusion of results from the former Victory Market, acquired in November 2004.

    Delhaize said Food Lion's sales were positively affected by investments in pricing, promotional and marketing activities, pricing optimization using multiple price zones, two successful market renewals (in Greensboro, N.C. and Baltimore, Md.), and the closing of stores by Winn-Dixie, a major competitor in the Southeast.

    Sales remained solid at Hannaford and Sweetbay, but they were challenging at Harveys, at the unconverted Kash n' Karry stores; and at the former Victory stores because of disruptions related to their conversion to the Hannaford banner, the company said. Victory sales picked up in the fourth quarter, however, thanks in part to a major marketing campaign to reinforce the Hannaford brand in the Massachusetts market.

    In 2005, the gross margin of the U.S. operations of Delhaize Group improved by 56 basis points to 27.2 percent, primarily due to continued margin management and price optimization at Food Lion and Hannaford; reduced inventory losses at Food Lion, and the expanded offerings in higher-margin departments such as produce, deli, and bakery. Selling, general, and administrative expenses increased as a percentage of sales by 33 basis points to 21.7 percent, driven by expenses related to the integration of Victory in Hannaford, and the ongoing conversion of Kash n' Karry stores to Sweetbay; higher medical, utility, and fuel costs.

    The operating margin of the U.S. operations amounted to 5.4 percent of net sales and other revenues. The operating profit of the U.S. business, meanwhile, increased by 7.2 percent, to $901.1 million.

    In 2006, Delhaize Group expects to open 54 new supermarkets in the U.S., including nine stores under the Bloom and Food Lion banners in the new market of Greenville-Spartanburg, S.C.; 14 new Hannaford stores, and nine relocated stores.

    The company plans to close 19 U.S. stores, resulting in a net increase of 26 stores to a total number at the end of 2006 of 1,563 stores. It also will remodel or expand approximately 158 units.

    The company will also continue aggressive banner conversions. This year, six Food Lion stores will be converted to the Harveys banner. All Kash n' Karry operations in the markets of Tampa/St. Petersburg will be re-launched under the Sweetbay Supermarket brand, and two new stores will be opened, adding 48 supermarkets under the Sweetbay banner.

    A market renewal in the Washington, D.C., area, meanwhile, will be completed in the second half of 2006. Food Lion will use its two new banners Bloom and Bottom Dollar together with the Food Lion banner in the renewal of the Washington market. This is the first time the retailer has brought the Bloom and Bottom Dollar markets out of their North Carolina test markets.

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