Dutch retailer Ahold insisted today (6 June) it has seen its sales improve in the US and Europe moving into the second quarter of the year, despite low consumer confidence and intensifying levels of promotional activity.
The company this morning booked a 0.1% and 0.2% increase in identical sales excluding fuel in the US and the Netherlands respectively as part of first-quarter results that included a fall in profits.
However, the retailer said there had been a “slight improvement” in sales in the second three months of 2012.
“We had a slow start to the year,” CEO Dick Boer said during a call with analysts. “It was mainly affected by the unfavourable timing of Easter compared to last year. We continue also to see quite cautious consumer spending in both markets and increased levels of competition.”
Boer said the sales performance came in the context of a down market, as consumers are reducing the amount they spend on food. He emphasised that in the US the firm had been able to grow its market share and in the Netherlands Ahold’s share had remained level.
“During the quarter – mainly the second half – we saw a slight improvement in the sales, which continued into the second quarter on both sides of the ocean. You could say that as a business we were able to ingest the circumstances that we are in.”
Boer revealed that, although there is not a “huge difference” between the sales trends witnessed in Ahold’s two largest markets, “you can see a little more uplift in the Netherlands versus the US”.
He added: “Consumer confidence is on the low end, we are expecting that will not change, but we are well positioned.”
Ahold CFO Jeff Carr said there will be “some positive ID sales in the quarter” when the group releases its second-quarter numbers.
“There will be a positive trend going through into the second quarter, with a little bit more focus on the Netherlands than in the US,” he said.
Ahold’s management said these gains were not the consequence of a step-up in promotional activity or consumer marketing and were not expected to have a negative impact on margins.
“I do not think there has been a dramatic shift in our advertising or promotional activity. But we have to keep sharpening our pencil. There has been a bit more of a focus on price in our advertising in the Netherlands and a bit more promotional activity in the US,” Carr revealed.
Throughout the year, Carr said he anticipated “some upside” in profit margins, which stood at 4.3% in the first quarter.
“I don’t see a lot of scope for significant improvement in the US, I expect it will be around those sorts of numbers for the balance of the year. In the Netherlands, we do see some scope to imprpve the margin… So there is some margin upside to be closer to the levels we achieved last year,” he commented.
While commodity costs have eased in recent months, Boer emphasised it was “not easy” to ensure that the cost savings benefiting food manufacturers also fed through to retailers.
“The US manufacturers are still pushing a lot of cost inflation into the market… In my opinion they are keeping some of this money – certainly to promote their own profitability but also to reinvest in promotions,” he suggested. “Cost price decreases they don’t give back so easily.”
However, he did reveal Ahold had found some success in negotiating down the price of private-label products in reaction to softening commodity costs.
“In private label – which is becoming a more significant part of our sales – we can renegotiate back there,” he said.