Delhaize, the Belgium-based retailer, has told just-food that the defection of US consumers to its cut-price rivals has hit its sales across the Atlantic and played a key role in its profit warning earlier today (18 July).
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The company, which owns the Food Lion and Hannaford chains in the US, said concern over the economy across the pond had led shoppers to flock to stores offering lower prices.
“Conditions have changed, particularly in the US, these past few months,” a spokesperson said from Belgium. “Consumers there are spending less, are now consolidating their shopping trips to less stores and, top-of-mind, are the discounters.”
Upon issuing its profit warning this morning, Delhaize said it expected same-store sales in the US to grow by 1.5-2.5% this year, down from an earlier forecast of 2.5-3.5%.
The warning caused shares in Delhaize to tumble and they stood at EUR36.52 at 16:56 CET this afternoon on the Euronext Brussels stock exchange – down over 8%.
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By GlobalDataPresident and CEO Pierre-Olivier Beckers said the company would look to lower prices in a bid to boost sales but would also look to cut costs to support margins. The company has already earmarked EUR60m (US$95.2m) in cost-savings from transport, warehousing and other activities.
“While the current environment requires us to address short-term market challenges, we remain focused on our long-term strategic commitments. We are implementing sustainable gross margin and cost-cutting measures to reinvest in our business and protect our bottom line,” Beckers said.
The cut in the annual forecasts meant Delhaize also issued revised guidance for its second-quarter results, which are due to be published on 4 August.
Delhaize said it expects second-quarter operating profit to be down 22% on the year to around EUR194m, although that fall is also due to integration costs linked to an acquisition in Greece and the sale of Di.
Underlying operating profit is expected to be down 7.9%, Delhaize said.
Stripping out the effect of exchange rate fluctuations, revenue for the second quarter is forecast to be down 2.6%. Same-store sales in the US are expected to be up 1.9% and 0.7% in Belgium.
