NETHERLANDS: Price investment weighs on Ahold's margins
- Q3 sales up 11%
- Operating profit down 3.7% on lower margins
- Net profit falls 46% on tax charge
Ahold margins under pressure
Dutch retailer Ahold has booked a decline in operating profit as investments in pricing hit margins.
The company booked an 11% increase in sales, which rose to EUR1.6bn (US$9.67bn) as its strategy to lower prices resulted in higher volumes. However, operating profit fell 3.7% in the third-quarter to EUR289m, as margins dropped to 4.1% from 4.4% due to the group's higher investment levels.
Net profit was hit by a EUR90m tax charge at its Scandanavian joint venture ICA, declining 46% to EUR139m, the group added.
The group also announced that Ahold board memebr James McCann will become COO or Ahold USA. In a seperate announcement, the company said that McCann would take over the duties of retiring COO Carl Schlicker in February.
Ahold Interim Report Q3 2012
Gaining market share in a challenging environment
Highlights - third quarter 2012
Sales of €7.6 billion (up 3.7% at constant exchange rates) Operating income €289 million (down 3.7%) Net income €139 million (down 45.9%), including a €90 million ICA tax charge Underlying operating margin 4.1% Conversion of first 14 Jumbo stores completed
Amsterdam, the Netherlands - Ahold today published its interim report for the third quarter of 2012.
CEO Dick Boer said: "We continued to invest in competitiveness and gained market share in our major markets. Market conditions remained challenging, with consumers cautious in their spending and with ongoing high levels of promotional activity in both the United States and Europe.
"Sales growth in the United States was modest, reflecting declining retail price inflation and a strong sales quarter last year. Through stringent cost control we were able to deliver a solid margin performance. In the Netherlands we were pleased with a strong sales performance, as our value investments gained traction. Margins in the Netherlands were impacted by these investments, which were not fully offset by cost savings and by the inclusion of bol.com for the full quarter.
"We remain cautious in our outlook and expect market conditions to continue to be difficult. We will closely monitor the potential impact of rising food commodity costs, particularly in the United States. We are confident that we are well on track to execute our strategy and we will continue to invest in growth."
Original source: Ahold
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