PREVIEW: Ahold's 2009 annual results

Dutch retail giant Ahold publishes its 2009 financial results tomorrow (4 March) and industry watchers will be monitoring the company's US business - and waiting for hints on the company's expansion plans this year.

The fiercely competitive nature of the US grocery market is likely to have weighed on the fourth-quarter profits of Ahold, which runs the Stop & Shop and Giant chains across the Atlantic.

"We forecast retail fourth-quarter operating profit at EUR334m (US$456.1m), which puts us some 6% below market expectations," SNS Securities analyst Richard Withagen wrote in a note to clients.

"This is almost entirely driven by the US operations, where we expect more margin pressure than the consensus on the back of the market's competitiveness and the demanding comparable."

Nevertheless, Petercam's Fernand de Boer insists Ahold's US businesses are faring well compared to some rivals in the market.

De Boer, who maintains a 'buy' rating on Ahold's shares, said: "In the US, Ahold continues to outperform its peers in terms of sales growth and in EBIT margin. Identical-sales growth in the US slowed by 0.5% compared to 3Q09 despite a tougher comparison base [but] US peers so far reported a 1% point slowdown. Ahold’s US margins are at the high end of the industry and still at a rising trend. The industry is still a downwards trend."

Last autumn, Ahold CEO John Rishton said the company was ready to "seize opportunities" as the recession forces the pace of consolidation in the industry.

Ahold has twice got out its chequebook in the US in recent weeks with the acquisition of the Ukrop chain and the purchase of five stores from Supervalu Inc.

And investors will be hoping Rishton tomorrow gives some indication of what Ahold will do with its financial resources in 2010.

"We estimate Ahold has EUR2bn of excess cash that could accelerate earnings through capex and/or acquisitions and/or buybacks," said Sanford Bernstein retail analyst Christopher Hogbin. "In our view, investors would welcome clarity from management about if, when and how it will use its balance sheet strength."

Hogbin added: "We see additional potential for Ahold to improve its existing operations - private label, non food, alternative formats - and expect management to update on plans for sustained innovation in the business."

Recent highlights include:

NETHERLANDS: Ahold shares up despite sales slowdown
21 January

Dutch retail giant Ahold today (21 January) reported slowing sales growth in the fourth quarter of 2009, although its shares rose in early trading as the figures beat analyst forecasts.

US: Supervalu offloads Connecticut stores
15 February

US retail giant Supervalu Inc is set to sell all its Shaw's stores in the state of Connecticut.

NETHERLANDS: Ahold completes Ukrop buy
9 February

Ahold, the Dutch conglomerate that owns US retailer Giant-Carlisle, has completed the acquisition of 25 stores from Ukrop’s Super Markets.

Ahold is cast as predator and prey
11 November 2009

Ahold's move to reorganise its business with a view to expand its operations has prompted a flurry of speculation over the Dutch retailer's future. With a sizeable war chest and the possibility to ramp up cost savings, Ahold is preparing to get its top-line moving and the market is buzzing with M&A rumours. Katy Humphries reports.