Dutch retailer Ahold has said it will continue to evaluate its price positioning in the US as retailers in the country face pressure on sales volumes.
The Stop & Shop and Giant Food Stores owner today (22 August) reported its half-year results, which included higher US sales and an increase in its market share, although operating margins were lower.
CEO Dick Boer said its US business saw “modest” sales growth of 2%, affected by an ongoing low level of inflation and volume pressure.
Boer told analysts on the firm’s earnings call that pressure was likely to remain unchanged for the remainder of the year.
Like other food retailers operating in the US, Ahold is battling competition from discounters, damp consumer sentiment, low inflation and an increase in pay-roll taxes.
Last week, Wal-Mart lowered its forecasts for annual sales and profits in part on the back of a “challenging” retail environment in ths US.
Boer said: “We’re operating in a relatively low inflationary environment in the US, net average price increases were less than 1% and we therefore saw volume declines in the US.” He added Washington in particular was affected by more competitive store openings and continued “pressure” on incomes.
“We continue to evaluate our [price] positioning and adjust it where needed in the competitive environment. That will never stop and we will never finish the work we are doing. Wherever we are, wherever we work, in whichever market … we always have to follow what the customer wants on positioning and value. There is no other way, that is retail.”
Boer said operating margins for the US were in line with expectations “largely due to the operating efficiencies we continue to gain and the good work that’s being done on our simplicity programme in the US”.
Earlier this month, Ahold announced plans to close all of its Stop & Shop stores in New Hampshire after they failed to meet the retailer’s expectations. The closures, the retailer said, will allow it to focus its investment and resources on continuing to grow its business in other areas of the northeast.
The chief executive told analysts Ahold would “continue to look at opportunities” to invest in growth in the US, despite the closures.
“It’s never nice to close stores but it’s clearly an exception, New Hampshire. We were trying to get some position in that market and were not really able to really grab market share. at the end of the day we decided this was not a fruitful exercise to continue staying in that market but certainly not something we would like to see more often. We are here to build stores and not close them. Of course we continue to look at opportunities to invest in growth.”
Ahold’s share price was down 0.43% to EUR12.84 at 16:29 CET.