Shares in Dutch retail giant Ahold slid this morning (3 March) after the company reported falling fourth-quarter and annual profits.
Ahold booked a 42.3% drop in net income to EUR154m (US$213.7m) for the fourth quarter of 2010. For the year as a whole, net income was down 4.6% at EUR853m.
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Fourth-quarter operating income fell 13.5% to EUR295m. In the US, operating income dropped by more than a third, hit by reorganisation costs and charges linked to the integration of US chain Ukrop, which Ahold acquired in December 2009.
Ahold made a fourth-quarter loss from its joint ventures after Swedish retailer ICA, in which Ahold owns a 60% stake, made a provision against deferred tax assets.
Over 2010 as a whole, Ahold’s operating income was up 3% at EUR1.3bn. However, retail operating margin dipped from 5.1% in 2009 to 4.9% due to the acquisition of Ukrop.
Ahold’s net sales were up 5.7% in 2010 at EUR29.53bn and rose 2.6% to EUR6.98bn for the fourth quarter. At constant exchange rates and after adjusting for the extra week in 2009, 2010 net sales climbed 4.4%. Fourth-quarter net sales were up 5.5%.
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By GlobalDataCEO Dick Boer said Ahold increased volumes and improved its market share in the Netherlands, the Czech Republic and the US in the fourth quarter.
However, Boer said Ahold had seen “intense promotional activity”, particularly in the US, as consumers “continued to focus on value”.
“Operating margins were negatively impacted by cost inflation that was not fully passed on to customers,” Boer said.
Ahold has proposed a 26% increase to its dividend and launched a new EUR1bn share buyback programme. Boer said the moves “reflected the confidence we have in our strategy and our ability to generate cash”.
Looking to 2011, Boer admitted Ahold expected 2011 to be “challenging for the food retail industry”.
He added: “Although there are signs of a gradual economic recovery, we expect consumers to remain focused on value and cautious in their spending in an inflationary environment. We will continue to reduce costs so that we can invest in our offering to improve the value we provide, while managing the balance between sales and margin.”
Ahold’s shares were down 3.1% at EUR9.39 at 12:22 CET.
Click here for the full statement from Ahold and check back later for further coverage of the company’s 2010 performance and outlook for 2011.
