Belgium-based retailer Delhaize Group today (12 January) announced plans to close over 140 stores in the US and Europe, resulting in the loss of 5,000 jobs.
The closures are part of the company’s New Game Plan, a strategy announced two years ago to focus on faster-growth markets and the discount channel, as well as drive down costs.
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The closures will hit Delhaize’s US operations hardest, with 113 under-performing Food Lion stores to be terminated, all in areas with the lowest store density. The company said it will be able to focus on the best-performing stores. A total of 42 Bloom stores will be converted to the Food Lion format, while the remaining seven will be closed and the Bloom brand retired.
Elsewhere, 22 stores in the Bottom Dollar chain in North Carolina, Virginia and Maryland will be converted to Food Lion and six stores will close. However the company reiterated its plans, announced in December, to add hundreds of Bottom Dollar stores in the next five years. A spokesman for the company could not confirm how many jobs these new stores will create.
Delhaize, meanwhile, will also close 20 stores in Serbia, Bulgaria and Bosnia and Herzegovina.
The company says costs related to the closures will hit earnings by EUR205m (US$261m), starting in the first quarter of the year.
Chief Executive Officer Pierre-Olivier Beckers said: “For a retailer, it is never an easy decision to close stores as we are fully aware of the impact on our associates, our customers and the communities we serve. Having said that, we feel these decisions are in keeping with our responsibility to our shareholders to deploy resources where they will achieve the highest return.”
The announcement included a trading update for the fourth quarter of 2011 and the year as a whole. Revenues were up 7.6% to EUR5.6bn for the quarter. However, without including Delta Maxi, the Serbian retailer Delhaize bought in March, fourth-quarter growth was just 1.5%.
Full-year revenue was up 4.6% to EUR21.1bn (+2.4% excluding Maxi).
Beckers called the results “disappointing”, despite the growth. “Consumers continued to feel pressured in the fourth quarter due to the macro-economic environment and this led to a reduction in spending. We also encountered an increase in competitive activity,” he said. “We are determined to further improve our price competitiveness in 2012, particularly in the US and Belgium.”
Shares slumped 9.66% to EUR53.84 at 15.20pm BST.
