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    Price Cuts Drove Q2 Margins Down at Stop & Shop/Giant-Landover: Ahold

    In posting its second-quarter earnings Friday, Ahold noted that margins had taken a hit at Stop & Shop and Giant/Landover, as the chains work to revitalize business in their respective market areas.

    In posting its second-quarter earnings Friday, Ahold noted that margins had taken a hit at Stop & Shop and Giant/Landover, as the chains work to revitalize business in their respective market areas.

    "We continued to invest in price and gave increased focus to promotions, both of which helped to drive sales and win customers, but, as anticipated, impacted margins," said Ahold c.e.o. John Rishton. "In the United States, the Value Improvement Program (VIP) has now expanded beyond price repositioning to marketing and branding. We unveiled new logos and a number of brand initiatives for Stop & Shop and Giant-Landover…as a further step in Ahold's global strategy to build powerful local consumer brands. Giant-Carlisle continued to gain share in a highly competitive market."

    At Stop & Shop/Giant-Landover, second-quarter net sales were $4 billion, up 1.7 percent from the same period last year. Net sales included $29 million of sales to Tops (before its divestment, such sales were recorded as intercompany sales). Identical sales rose 2.2 percent at Stop & Shop (1.0 percent excluding gasoline net sales) but decreased 1.5 percent at Giant-Landover (1.7 percent excluding gasoline net sales), as a result of lower pharmacy sales. Operating income was $125 million, or 3.1 percent of net sales, a decline of $36 million from the year-ago period. Margins were affected by price investments connected with the implementation of VIP, with improvements expected later in the year.

    Further, operating income in the quarter included restructuring, severance, and related charges of $37 million and impairment charges of $7 million, partially offset by gains on the sale of assets of $22 million.

    For the first half, net sales were $9.2 billion, up 1.5 percent vs. last year. Net sales included $85 million of sales to Tops. Identical sales rose 1.6 percent at Stop & Shop (0.6 percent excluding gasoline net sales) and fell 1.5 percent at Giant-Landover (1.6 percent excluding gasoline net sales). Operating income was $327 million (or 3.6 percent of net sales), down $62 million from the same period last year.

    Second-quarter net sales at Giant-Carlisle were $1.1 billion, up 11.5 percent compared with the same period last year. Identical sales went up 7.0 percent (4.1 percent excluding gasoline net sales). Operating income was $51 million, or 4.6 percent of net sales, a decline of $10 million vs. the year-ago period. Operating income in the quarter included restructuring related charges of $8 million.

    For the first half, net sales were $2.5 billion a rise of 10.2 percent from last year. Identical sales grew 6.3 percent (3.9 percent excluding gasoline net sales). Operating income was $123 million (or 4.9 percent of net sales) -- flat compared with the same period last year.

    For the company as a whole, Amsterdam-based Ahold reported second-quarter net sales of 235 million euros, down 0.8 percent from the year-ago period. Net sales increased 7.3 percent at constant exchange rates, however. Operating income for the quarter was 235 million euros, a decrease of 39 million from last year, while income from continuing operations rose 7 million euros to 177 million euros.

    At the half-year mark, net sales for Ahold were 13.3 billion euros, a decline of 1.1 percent from the year-ago period. At constant exchange rates, net sales grew by 7.0 percent.

    Half-year operating income was 571 million euros, 16 million euros less than last year, and income from continuing operations in this period was 398 million euros, 72 million euros higher than last year. Net income was 599 million euros, down 1.9 billion vs. compared the year-ago period, which included a 2 billion-euro result on divestments.

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