Dutch retailer Ahold today (23 August) booked an increase in first-half profits but its shares fell amid pressure on margins and the company’s caution over future trading. Analysts were largely upbeat about the results but expressed some concern over Ahold’s domestic performance.

Petercam analyst Fernand de Boer

“On the one hand we are pleased with the sales figures where Ahold is gaining share in all divisions. Even on a broader US definition it is gaining share in all divisions. In addition, operating cash flow remains very strong, significantly stronger than in the first half of 2011. This offers room for more investments in growth or maybe another share buy-back next year.

“On the other hand, we are disappointed on the margins in the Netherlands. We understand that the consumer sentiment is weak and there is a need for price/promotions to drive sales. However, despite the market share gain so far, we consider the return on the investment as limited, but also realize that this is difficult to judge on a quarterly base.”

Shore Capital analyst Clive Black

“Whilst a steady trading period, Ahold is able to reiterate that it is on target to deliver cost savings in its 2012-14 plan. Additionally, the group is now batting more of the front foot and this is reflected in the group’s ongoing expansion activity. In the most the acquisition of 82 Jumbo stores in The Netherlands, the purchase and integration of 15 Genuardi outlets in and around Philadelphia, acquired bol.com in The Netherlands and further expanded the Albert Heijn estate in Belgium to six outlets. Furthermore, we note that management is reported on morning news wires as stating that it continues to look at acquisition opportunities in the USA.”

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Kepler analyst Fabienne Caron

“The US surprised positively with better like-for-like of 2.2% (consensus 1.6%), which led to 4.3% EBIT margin (+20bp year-on-year). Margin was driven by cost savings as well as lower health and welfare costs this quarter. We do not know yet how much of the second impact is recurring.

“However, the company is cautious on the US given increasing raw material prices. The Netherlands surprised negatively mainly on the margin front (like-for-like reached 1.5% vs. consensus 1.3%). Continued pricing activity was expected but the company quotes as a fact the unsuccessful European football championship campaign.”

Senior KBC Securities analyst Pascale Weber

“With the exception of the lower margin in the Netherlands, Ahold’s performance was strong in 2Q12. Management expects a margin of around 4% for this year in the US. We were counting on 4.1% and will revise it downward by 10bps.

“For the Netherlands, they expect a margin of “close to 6%”. We were forecasting 6% and will tweak it down as well. So no major changes to our forecasts. Supplier prices are expected to rise in the US in response to higher agricultural prices. In the US, retailers are more successful however to pass on higher prices compared to the Netherlands where it takes more time.”