Ahold has booked a 3% drop in net income during the first quarter of 2012 as the retailer invested in price cuts in the face of weakening consumer sentiment in Europe and the US.

First-quarter net income fell 3.1% to EUR282m (US$352m), the Dutch retailer said today (6 June). Operating income dropped 6.3% during the period to EUR416m.

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CEO Dick Boer said Ahold’s increased level of promotional activity hit profitability but allowed the group to grow its market share in the US and retain its market share in the Netherlands.

“We continued to invest in competitiveness both in the United States and in Europe with higher levels of promotional activity, resulting in market share gains in the United States and maintaining our market share in the Netherlands,” Boer said.

First-quarter sales rose 1.9%, excluding currency exchange, to EUR9.7bn. In the US, where the company generates the bulk of its sales, revenues increased 2.8% and in the Netherlands sales rose 1.2%.

Identical-store sales in the US were up 1.4%, although they rose by just 0.1% when fuel was excluded from the results. Ahold said identical-store sales in the Netherlands inched up 0.2%.

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Boer said growth was hampered by the timing of Easter as well as “challenging market conditions”. He added that underlying sales improved towards the end of the quarter and said he was “encouraged” by sales trends moving into the second quarter.

“We expect 2012 to be another challenging year for the food retail industry, with intense competitive activity and consumer spending under pressure due to economic uncertainty, particularly in Europe. We remain confident that our strong brands are well positioned and are well on track to deliver on our strategy,” he concluded.

Click here for the full release and click here for coverage of Ahold’s conference call with analysts.

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