On the money: Delhaize getting its house in order
International food retailer Delhaize has pleased many investors and analysts by returning to sales growth in the US and announcing plans to close more loss-making stores in the country.
Delhaize's share price rose by 10% on the New York Stock Exchange in morning trading today (17 January), recovering sizeable chunks of ground yielded in the past 12 months.
For the 12 months to the end of December, group net sales rose by 7.7% versus 2011, to EUR22.7bn (US$30bn).
At the heart of this rally appeared to be the Belgium-based retailer's return to sales growth in the US, where it posted a 2% rise in fourth-quarter net sales and a 6% lift in sales for the full-year.
Investors appeared willing to overlook figures showing that the retailer's US fell by 2% in local currencies during the quarter and the year.
This is because US sales actually rose in local currencies if one excludes the 126 Food Lion stores closed by the group early in 2012. With some dead wood chopped and more on the way, the general reaction to today's results has been that Delhaize is getting its house in order.
Profits won't be pretty for 2012, as the firm has already predicted numerous times, but Delhaize CFO Pierre Bouchut believes "cost control is starting to pay off".
Today, the retailer announced a fresh wave of store closures, most of which will affect the US Sweetbay grocery chain.
"We decided to close the loss making stores and we believe it's a sensible decision," Bouchut told analysts on the firm's conference call today.
"Regarding the remaining stores, it is the first step to stop the bleeding at loss making operations," he said.
In addition, Bouchut said the group will invest more behind Hannahford, to support improved volume trends. Alongside this, Delhaize is keen to open more Bottom Dollar Food outlets in the Philadelphia and Pittsburg areas.
Bouchut said: "We will continue to develop in those two places, to enhance our identity in those places and to have the leverage on the supply chian. Losses will progressively disappear and we hope by 2015 Bottom Dollar will post positive figures."
In terms of new activity on Food Lion, Bouchut said the group has been "testing an everyday low price strategy throughout Food Lion network" on frozen food and dairy. "We are encouraged by the consumer response on this one and there will be more details [at our full results release] on 8 May," he said.
However, in 2013, charges will continue to hit the group. It expects an EUR80m charge in the first quarter from the latest store closures, which will include 34 Sweetbay outlets.
Overall, though, things are looking up for the firm.
- Analysis: Is Heinz, Kraft merger "a growth story"?
- The challenges awaiting ConAgra's new CEO
- M&A Watch: Who could be on 3G Capital's radar?
- Focus: Can Mars gain share in Indian chocolate?
- Viewpoint: Faber-led Danone gets realistic
- UPDATE: Heinz, Kraft strike merger agreement
- Fatal explosion at French desserts firm Senagral
- Kraft "in buyout talks" with Heinz owner 3G
- Infographic: Heinz, Kraft unveil combined business
- Buffett: Kraft Heinz to withstand health focus