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August 25, 2011

On the money: Ahold to enter Germany in 2012

Ahold, the Dutch retail giant, plans to move into Germany next year with stores similar to its domestic AH To Go convenience outlets.

By Dean Best

Ahold, the Dutch retail giant, plans to move into Germany next year with stores similar to its domestic AH To Go convenience outlets.

Speaking to analysts after Ahold issued its first-half results, CEO Dick Boer said the retailer would look to open outlets in western Germany in the second half of 2012.

Germany is one of the most competitive retail markets in Europe but a spokesman for Ahold said the company believed it could succeed in the market. “They are ready for another competitor [in the convenience sector] and that could be us.”

The move into Germany will follow Ahold’s decision to expand into Belgium, where it opened its first store in March under its flagship Albert Heijn supermarket banner. Ahold plans to open its second outlet in Belgium later this year with more stores planned for 2012.

However, the decision to open c-stores in Germany emphasises Ahold and Boer’s faith in the convenience channel. The retailer opened its second Giant To Go store in the US in May and Boer said the convenience sector presented an opportunity for the company on both sides of the Atlantic.

“I’m quite excited about convenience. It’s an opportunity that retailers have on both sides of the ocean. Customers are still more focused on speed and good service,” he said.

Shares in Ahold fell today after the retailer reported a drop in second-quarter sales and profits. Sales were affected by the impact of exchange rates and increased on a constant-currency basis. Foreign exchange also had an impact on Ahold’s operating income but the retailer also pointed to the impact of restructuring costs, notably in the US.

However, analysts questioned Ahold about its performance in the US, where its identical-store sales excluding fuel increased 1.2% in the second quarter but where inflation was over 4%. Ahold, which also runs chains including Stop & Shop and Giant Carlisle in the US, also saw its margins across the Atlantic fall due to the change in timing of Easter, partial success in passing on higher fuel costs to consumers and increased promotional costs.

Nevertheless, Boer said the retailer performed better than its rivals in the US. “We were able to grow our market share,” Boer said, referring to Ahold’s supermarket competitors. “Compared to our competitors, we outperformed them again in the second quarter.”

The Ahold chief said the US economy was “tough” with consumers looking for value but insisted the company could protect margins by controlling costs. “The main thing that retailers have to do is adjust to the circumstances our consumers are in. If we have pressure, we can offset that by becoming more efficient in our organisation,” Boer said. “One of the good things we do, even in this inflationary environment, is have really rigourous cost control.”

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