Targeted promotions in US drive volumes at Delhaize

Targeted promotions in US drive volumes at Delhaize

Belgian retailer Delhaize said today (11 March) that it had exceeded its forecast for 2009 earnings, despite booking a 22.9% drop in operating profit during the final quarter of the year.

Delhaize said its 2009 operating profit rose ained 4.2% to EUR942m (US$1.28bn), beating the company's guidance range of 1-4% growth.

However, in the fourth quarter of the year, the group saw operating profits plunge from EUR288.7m to EUR223m.

Delhaize said that the drop was primarily due to fluctuations in exchange rates and one-off items.

Stripping out the impact of these, the company emphasised that operating profit would only have dipped 1.4%.

Sales, particularly in the US where the company operates the Hannaford, Bottom Dollar Food and Food Lion banners, were driven by price promotions, the company said.

Revenues gained 2.6% during the full-year, climbing to EUR19.93bn. Comparable store sales in the US fell 0.4%, while ID sales were up 2.7% in Belgium.

“In the US, our operating companies experienced a marked improvement of the volume trends as a result of targeted price investments and adapted assortments, in part financed by better inventory management results and a more favorable product mix. Delhaize Belgium had a very strong year, with solid market share growth combined with great execution and better inventory control,” president and CEO Pierre-Olivier Beckers said.

While the company invested in lowering prices during the fiscal year, Delhaize bolstered margins by cutting EUR100m in costs and EUR50m in working capital improvements during the period. Operating margin for the year stood at 4.7%, the company said.

Looking to 2010, Delhaize said that it expected to achieve operating profit growth of between 7% and 10%, driven by the company's "new game plan".

“All of our operating companies have started to fine-tune their pricing strategies to achieve local value leadership, and we are gearing up for many other projects, including achieving EUR300m of annual operating cost savings by 2012. We are ready for the challenges of 2010," Beckers said.

For the full earnings release from Delhaize click here and click here for its outlook for 2010.