-- Delhaize fourth quarter net profit down 48%, hit by impairments resulting from its restructuring
-- Delhaize to accelerate revamp of stores, expects to exceed cost savings target
-- Pierre Bouchut will become chief financial officer, succeeding Stefan Descheemaeker
By Robert van den Oever
Of DOW JONES NEWSWIRES
AMSTERDAM -(Dow Jones)- Delhaize Group (DELB.BT), the Belgium-based food retailer which generates over half of its sales in the U.S., Thursday said it will accelerate the revamp of its stores in the U.S. and Belgium to boost its competitiveness as the cost of its ongoing restructuring program led to a sharp drop in profit.
The supermarket operator will close 146 underperforming stores, mainly in the U.S., where Food Lion is its flagship brand, hitting its first quarter profit by about EUR125 million.
"There are some Food Lion stores where we didn't think it made any sense to invest, they were unprofitable and in low-density areas," said Chief Financial Officer Stefan Descheemaeker.
The company will also convert existing supermarkets to its discount formula Bottom Dollar Food and open between 20 and 50 new stores this year.
Chief Executive Officer Pierre-Olivier Beckers said he sees "positive results" from its new formula: "It's a business model with lower capital expenditure, lower margins, but greater return at the end of the day," he added, "Though it takes time for customers to understand what the new brand is about".
In its outlook for 2012, Delhaize said it expects its operating margin will continue to be impacted by investment in the U.S. and margin pressure in Southeastern Europe. Analysts predict that margin pressure will lead to continuing disappointing results.
Net profit for the fourth quarter dropped to EUR99 million from EUR190 million a year earlier, due to EUR127 million in impairment charges related to the store revamp which was announced in January. Sales grew 7.6% to EUR5.64 billion, helped by the acquisition of Serbian supermarket chain Delta Maxi.
However, comparable store sales in the U.S. were down 0.4% as consumers continue to cut back and opt for cheaper products. Both margins and volumes declined. In Belgium, which counts for a quarter of group sales, comparable store sales were down 1.5% although margins remained stable.
Delhaize continues to look for cost cuts to improve profitability, and Thursday said it will exceed its target of EUR500 million in annual savings by the end of this year.
At 1109 GMT, Delhaize shares traded down 6.5% at EUR38.60, by far the biggest loser on the benchmark index BEL-20 which was up 1.3%.
The results contrast with those of Dutch rival Royal Ahold NV (AH.AE), which competes with Delhaize in the U.S. through its Giant and Stop & Shop retail chains. During the fourth quarter, Ahold's U.S. comparable sales were up 3.9% on higher margins.
Delhaize said Pierre Bouchut will become Chief Financial Officer, succeeding Stefan Descheemaeker, who will serve as head of Delhaize Europe. Bouchut is well-respected in the industry, having proved himself at French multinational retailers Carrefour SA (CA.FR) and Casino Guichard-Perrachon SA (CO.FR).
Chairman Georges Jacobs de Hagen will retire as scheduled on May 24, to be succeeded by Mats Jansson, who joined the board in May 2011.
The results are "very disappointing", said KBC analyst Pascale Weber. She said Delhaize made a "tactical mistake" by raising prices to match inflation, and she expects it will take at least six months for the planned actions to have an impact on growth. KBC rates Delhaize at accumulate.
By Robert van den Oever; Dow Jones Newswires; +31 20 571 52 01; email@example.com
(END) Dow Jones Newswires
March 08, 2012 07:02 ET (12:02 GMT)
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