Delhaize booked a decline in third-quarter earnings, which were hit by spending on pricing in Belgium and the US.
The company announced today (7 November) that operating profit fell by 3% in the three months to the end of September, dropping to EUR231m (US$294.7m). However, excluding the impact of currency exchange, underlying operating profit slid by 9.4%.
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The company said margins were hit by its decision to invest in pricing initiatives in a bid to improve market share trends in its two largest markets – Belgium and the US. As a result, the company was able to report a 1.6% lift sales at identical exchange rates, which climbed to EUR5.81bn.
Nevertheless, Delhaize added EBITDA remained “resilient”, increasing by 4.1% at actual exchange rates to EUR398m. Stripping out currency exchange EBITDA dropped 3%.
“Despite tough market conditions, we are seeing signs that our investments are yielding positive results, with revenues increasing and strong cash generation in the last three months,” CEO Pierre-Oliver Beckers said.
According to Beckers, the group’s US Food Lion chain saw same-store sales rise at the 60% of outlets that have been repositioned. In Belgium, Beckers said he was not “happy” with the evolution of Delhaize’s market share, but added price investments have resulted in the company’s second consecutive quarter of comparable domestic sales growth.
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By GlobalData“We remain focused on improving our price competitiveness while maintaining our cash flow discipline. This approach should lead to sustainable revenue growth and the realization of shareholder value,” Beckers said.
Delhaize confirmed full-year operating profit guidance is expected to come in at the bottom-end of its forecast for a 15-20% decline. In May, the company issued a warning suggesting its plans to invest in price would result in steep drop in profits.
