Belgian retailer Delhaize Group, which saw profits fall in the first half of the year, is preparing a new efficiency plan to redouble efforts to save costs.
The retailer yesterday (22 August) posted a drop in first-half profits and admitted it now expects to achieve the bottom-end of its full-year earnings guidance range.
Since 2009, the company has been working towards a target to cut costs by EUR500m (US$675.8m) by the end of 2012. Delhaize’s “New Game Plan” strategy is focused on driving down costs, expanding in faster-growth markets and in the discount channel.
Early this year, Delhaize announced plans to close over 140 stores in the US and Europe, resulting in the loss of 5,000 jobs, all as part of the plan.
CEO Pierre-Olivier Beckers told analysts on the firm’s earnings call yesterday (22 August) that the cost savings plan will be concluded this year and the group is “on track” to exceed the targeted EUR500m to deliver EUR550m in cost savings.
However, Beckers said despite the company’s progress to date, the current trading environment means Delhaize needs to achieve “greater efficiencies and cost savings”. As a result, the company said it is working on a new efficiency plan, which it said it will communicate the details of “in due course”.
“This is mainly focused on reducing complexity across the group,” Beckers said. “Our goal is to fundamentally transform our culture with respect to efficiencies as part of a one-time programme.”
In addition, the company said it has proposed “a stronger focus on cash flow” this year.
“We have taken stricter actions which are all consistent with our plans,” Beckers said. “While we are positive on our progress in implementing our brand strategy, we need to be alert to stay consistent in our pricing policies. We are confident we are on track to meet the bottom end of the guidance range.”
The retailer yesterday said it now expects to achieve the bottom-end of its full-year earnings guidance range.
Delhaize is expecting a decrease in underlying operating profit of between 15% and 20%.