By Robert van den Oever
AMSTERDAM--Royal Ahold NV (AH.AE), which runs the Stop &
Shop and Giant supermarket chains in the U.S., Thursday posted
solid second-quarter profit growth as price cuts paid off.
Chief Executive Dick Boer said he expects "market conditions to
remain difficult", as competition intensifies in the U.S. and
consumer spending is drained further by economic uncertainty in
Europe. Boer added Ahold is "cautious about the potential impact of
rising food commodity costs, particularly in the United States for
the balance of the year".
Ahold is outperforming Belgian rival Delhaize Group (DELB.BT) in
the U.S., even though its flagship chains have faced fierce
competition as retailers have battled to lure increasingly
price-sensitive customers. Both companies generate more than half
of their sales in the U.S., but Delhaize has been embroiled in a
protracted store revamp program for several quarters which has
eaten into its margins. Delhaize Wednesday reported a 29% fall in
net profit.
Net profit rose 24.6% from a year earlier to 248 million euros
($309 million), exceeding analyst expectations of EUR241.7 million,
as charges in the year-earlier period weren't repeated.
Sales rose 11.9% to EUR7.692 billion, boosted by the Easter
period falling into the second quarter rather than the first like a
year earlier. Operating profit rose 18.5% to EUR326 million.
The company recorded a 17.3% rise in revenue in the U.S., while
in the Netherlands, where it controls about a third of the market
through its Albert Heijn chain, sales were up 5.3%. In the
Netherlands, which accounts for a third of Ahold's sales, the
retailer is suffering from low consumer confidence as shoppers
grapple with the government's austerity measures. Operating margin
in the Netherlands was 5.4% compared to 6.2%, with market share at
Albert Heijn slightly ahead of last year.
Earlier this month, Ahold completed the acquisition of Dutch
retailers 78 C1000 and 4 Jumbo, comprising 82 stores that will be
remodeled under the Albert Heijn banner. In 2011, the stores
generated EUR800 million in annual revenue.
Ahold is aiming to put its excess cash to better use, as
shareholders call for a higher capital yield. In March, it said it
aimed to lower its cash position to EUR1 billion and invest the
rest in acquisitions, raising dividends and repaying bonds with
high interest rates. At the end of second quarter, it held EUR1.7
billion in cash.
Ahold shares closed Wednesday at EUR10.44, valuing the company
at EUR11 billion. The shares have gained almost 30% in the past 12
months.
Write to Robert van den Oever at
robert.vandenoever@dowjones.com
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