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Delhaize Group has leading positions in food retailing in key markets (Photo: Delhaize Group/FIS)
COMPANY OF THE WEEK: Stable Group Revenues for Delhaize
(BELGIUM, 8/27/2010)
Delhaize Group (Public, EBR:DELB, NSYE:DEG), the Belgian international food retailer, has released financial results for the Second Quarter 2010.
Highlights Second Quarter 2010 (at identical exchange rates)
- Stable Group revenues (+4.7 percent at actual exchange rates)
- Comparable store sales growth of -3.6 percent in the United States (U.S.) and 5.0 percent in Belgium
- Operating margin of 4.2 percent (4.3 percent at actual exchange rates); solid operating margin of 4.8 percent in Belgium
- Strong free cash flow generation of EUR 182 million (at actual exchange rates)
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| Left, Bloom supermarket self scan technology and right, Bottom Dollar Food, the deep discount concept, both supermarkets in the U.S. |
Financial Highlights First Half 2010 (at identical exchange rates)
- Revenue growth of 0.8 percent (+1.2 percent at actual exchange rates)
- Operating margin of 4.5 percent (4.5 percent at actual exchange rates)
Other Highlights
- New Game Plan cost savings are progressing as planned. As a result, the company has identified an additional EUR 200 million cost of sales savings on top of EUR 300 million selling, general and administrative expenses savings announced as part of the New Game Plan in December 2009 and leading to a total of EUR 500 million in savings by the end of 2012.
- Greek authorities approve full acquisition of Alfa Beta minority shares
- Update operating profit growth guidance to -2 percent to 2 percent compared to 2 to 5 percent previously (at identical exchange rates and excluding 2009 U.S. restructuring, store closing and impairment charges.
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Delhaize Group CEO
Pierre-Oliver Beckers
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Pierre-Olivier Beckers, President and Chief Executive Officer of Delhaize Group, commented: “In the second quarter of this year, we were able to maintain stable revenues for our Group, despite negative inflation resulting from our structural price investments at Food Lion and persistent difficult trading conditions in the U.S Southeast. Delhaize Belgium’s performance continues to be outstanding with the highest market share gains of all Belgian retailers this quarter. In Greece, Alfa Beta continues to gain market share and shows resilience in a difficult economic environment.”
“We continue to make steady progress on the execution of our New Game Plan. While we are disappointed in our Southeast U.S. sales numbers, we believe they are not reflective of the underlying strength and the long term growth potential of the business. We are committed to our strategic price investments started at the beginning of the year at Food Lion and believe that we have the right value proposition to respond to the needs of pressured consumer. We are encouraged by the fact that we have been able to keep selling, general and administrative expenses in the U.S. flat in nominal terms. Effective initiatives have allowed us to keep a stable gross margin while our operating margin, even though impacted by negative sales leverage, stayed at a healthy level.”
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| Alfa-Beta (AB) is the second largest food retailer in Greece, focusing on customers looking for competitive pricing as well as high quality products and services |
“In addition, we are not only on track to achieve our EUR 300 million annual gross cost savings target by the end of 2012, we have now identified an additional EUR 200 million of gross savings in cost of sales across our Group. The largest of these initiatives is the creation of a single procurement organization for Delhaize America, which will combine all our U.S. buying functions, a natural next step towards becoming a stronger and unified U.S. entity.”
“As a consequence of our commitment to continued price investments, the lower than expected outlook on U.S. inflation for the rest of the year, and the persistently difficult and volatile economic and competitive environment we are facing in the U.S Southeast and the increasingly tough environment in Greece, we now expect operating profit growth to range between -2 percent to 2 percent at identical exchange rates for the full year 2010.”
2010 Financial Outlook
On the basis of the results of the first half of the year and the outlook and plans for the remainder of the year, including the company’s commitment to continued price investments, Delhaize Group updates its full-year guidance to -2 to 2 percent operating profit growth compared to 2 to 5 percent as previously announced (excluding the U.S. restructuring, store closing and impairment charges of EUR 44 million in 2009), both at identical exchange rates.
Delhaize Group now expects capital expenditures for the full year to amount to EUR 700 million compared to EUR 800 million as previously announced (both at identical exchange rates), mainly attributable to delays in new store openings. Delhaize Group plans a net addition of 82 to 92 stores to its network by the end of the year instead of 102 to 112 previously announced.
About Delhaize Group
Delhaize Group is a Belgian international food retailer with activities in six countries (United States, Belgium, Greece, Romania, Indonesia, Luxembourg) on three continents. The Group is listed on Euronext Brussels (ticker symbol: DELB) and on the New York Stock Exchange (ticker symbol: DEG).
At the end of 2008, Delhaize Group's sales network consisted of 2673 stores. In 2008, Delhaize Group posted EUR 19.0 billion in revenues and net profit of EUR 467 million. Delhaize Group employs approximately 141 000 people.
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| Mega Image is the largest supermarket operator in Bucharest, Romania |
Delhaize Group has leading positions in food retailing in key markets. These positions are built through strong regional companies going to market in a variety of food store formats. The operating companies benefit from the Group's global strength and best practices. The Group is committed to offering a locally differentiated shopping experience to its customers in each of its markets, to delivering superior value and to maintaining high social, environmental and ethical standards.
Delhaize Group was founded in Belgium in 1867. Jules Delhaize, professor of commercial sciences, dreamt of revolutionizing food retailing in Belgium, creating a branch network, charging set prices and cutting down on the succession of intermediaries by opening a warehouse. He was helped in this by his brother Edouard and his brother-in-law Jules Vieujant, also teachers. For their new company, they chose the lion, the symbol of strength, which is the emblem of Belgium, together with its motto: unity is strength.
Delhaize America operates under the banners Food Lion, Bloom, Bottom Dollar, Harveys, Hannaford Bros., and Sweetbay, each of which has a distinct strategy and a well-established brand image. Delhaize Group's Belgian sales network consists of several brand names, depending on the specialty, store size and whether the store is directly operated, franchised or affiliated. Delhaize Supermarket is the leading banner of Delhaize Group in Belgium. The other supermarket banner, AD Delhaize, is the most important growth vehicle for Delhaize Group in Belgium since a few years.
Alfa-Beta is the second largest food retailer in Greece. Alfa-Beta focuses on customers looking for competitive pricing as well as high quality products and services. In May 2000, Delhaize Group acquired an ownership interest in Mega Image, the largest supermarket operator in Bucharest. In 2004, Mega Image became fully-owned by Delhaize Group. At the end of 2008, Mega Image operated 40 supermarkets.
In 1997, Delhaize Group entered Indonesia by acquiring an interest in Super Indo, an operator of 11 stores. The company has grown steadily and operated 63 stores at the end of 2008. Delhaize Group owns 51 percent of Super Indo.
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Information of the company:
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Address:
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Square Marie Curie 40
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City:
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Brussels
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State/ZIP:
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(1070)
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Country:
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Belgium
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Phone:
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+32 2 412 22 11
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Fax:
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+32 2 412 22 22
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E-Mail:
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info@delhaizegroup.com
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