AHOLD U.S. GAINS; WILL ACQUISITIONS SLOW IT?

ZAANDAM, Netherlands -- As expected, the Stop & Shop Cos. acquisition hoisted third-quarter and year-to-date results at Ahold here, but industry observers wonder how shifts in U.S. operations will affect the Dutch retailer's near-term performance.Propelled by the absorption of the Quincy, Mass.-based chain, Ahold's U.S. results soared -- a 57% sales gain and a 103% jump in operating results for the

ZAANDAM, Netherlands -- As expected, the Stop & Shop Cos. acquisition hoisted third-quarter and year-to-date results at Ahold here, but industry observers wonder how shifts in U.S. operations will affect the Dutch retailer's near-term performance.

Propelled by the absorption of the Quincy, Mass.-based chain, Ahold's U.S. results soared -- a 57% sales gain and a 103% jump in operating results for the 12-week third quarter ended Oct. 6. Total U.S. quarterly sales were $3.11 billion vs. $1.98 billion a year ago, and operating results totaled $97.8 million, up from $48.1 million.

For the 40-week period, sales at Ahold USA, the company's Atlanta-based U.S. arm, rose 28% to $8.02 billion from $6.25 billion a year earlier. Operating results climbed 44% to $224.2 million from $155.3 million.

Individually, Ahold's U.S. chains also reported higher sales. Bi-Lo, Mauldin, S.C., which has had a series of disappointing quarters, picked up steam in the third quarter, with a 4.9% sales rise to $598 million from $571 million a year ago.

"Bi-Lo was our first American chain. We are still proud of the company, and now we are seeing its strengths even with the competition there," Jan Hol, Ahold's vice president of public relations, told SN last week. "There is a healthy profit there, and we are coming back at a rapid pace."

Third-quarter sales at Giant Food Stores, Carlisle, Pa., rose 12.6% to $382 million. Edwards Super Food Stores, Windsor Locks, Conn., had quarterly sales of $461 million, representing a 26.1% gain. Stop & Shop's sales were $1.04 billion for the quarter. Sales at Finast, Maple Heights, Ohio, climbed 5.6% to $223 million, while Tops Markets, Buffalo, N.Y., saw a 7.3% jump in sales, to $334 million.

Although sales increased at Tops and Finast, both chains reported slightly lower operating results because of heightened competition, Ahold said. Ahold's total sales in the third quarter were $5.52 billion, up from $4.31 billion a year ago, the company reported. Year-to-date total sales rose to $15.8 billion from $13.8 billion. Total net income climbed to $93.1 million from $63.1 million for the quarter and to $247.7 million from $201.1 million for the 40 weeks.

Despite the gains, securities analysts told SN they are curious to see how everything will play out next year as Ahold's new U.S. operating units develop and its international growth moves take shape in Asia and Latin America. This fall, Ahold unveiled plans to merge its Finast division into Tops; split its Edwards operations between Giant and Stop & Shop; shift top-level executives in U.S. divisions; and expand into China, Southeast Asia, Spain and Brazil.

Coming off a hectic 1996, Ahold next year must secure loose ends left from its spate of new enterprises, said Gary Giblen, managing director at Smith Barney, New York.

"They may have too much on their plate, and 1997 will be a very challenging year for them," Giblen said. "The expectations got really high when everyone began talking about the Stop & Shop acquisition and the synergies across divisions. Now they are getting a little bit of the morning-after syndrome. Investors are now looking a little bit harder at the time frame needed to integrate all these acquisitions and the time frame needed to realize these synergies."

He added, "You could pretty much write off 1997 as a rebuilding year. I think management will need a big box of Alka-Seltzer next year because there is going to be some acquisition indigestion and operating challenges that haven't been fully addressed in some of their divisions in the United States."

But Giblen noted that Ahold has reversed negative trends in the past and could successfully juggle its latest endeavors in the long term. "Ahold has done a great job in the Southeast with Bi-Lo. They had some problems initially with combining it with Red Food. Now comp sales have come back, and they are very strong," he explained. "It seems to be an honest to goodness turnaround. And that is much to their credit."

Ahold also may see some reduced numbers in the first half of 1997, but results should rebound in the second half, said Mark Husson, managing director at J.P. Morgan Securities, New York.

"The numbers look fine right now, but there is an awful lot going on with Ahold at the moment. It's very difficult to look at the numbers and say you can definitely see what is happening in the underlying business," he said. "What is likely to happen is the restructuring charges that are taken to the [profit and loss] account will continue to depress the numbers for a little while as they bring Finast into Tops and consolidate Edwards into Stop & Shop. All those things take time and money.

"Next year should be a much stronger year, especially in the second half," Husson added. "Now having talked a very good game, it's time for them to start delivering the numbers." Jonathan Ziegler, an analyst with the San Francisco office of Salomon Bros., New York, said the inertia from Ahold's rapid growth pace likely will help it clear restructuring hurdles.

"They do have a lot to digest with the consolidation of Stop & Shop, but they also have a lot of momentum now," he said. "They'll have improvements under the Tops-Finast umbrella. That should play out next year. I wouldn't be surprised if we see them announce more acquisitions.

"Now that they see the U.S. industry consolidating, I think they don't want to let anything get away," Ziegler noted. "This is a company that is not asleep."

While Ahold acknowledges skepticism about its ability to digest its speedy growth, company officials are confident that the robust sales and earnings trends will follow into the new year, Hol said.

"I can see that some people are wondering if we can manage our growth, but we have proved that we can deliver on our promises. We are growing at a rapid pace, but everything is under control," Hol said. "We told our shareholders that we expect to have a healthy 1997. We expect a 15% increase in earnings per share in 1997. We deliver what we promise. We are on the right track."

U.S. SUPERMARKET 3RD-QUARTER RESULTS

Chain Sales Change Same-Store

Stop & Shop $1.04 billion N/A + 2.5%

Bi-Lo $598 million + 4.9% + 4.2%

Giant $382 million + 12.6% + 2.4

Edwards $461 million + 26.1% - 0.7%

Finast $223 million + 5.6% - 1.8%

Tops $334 million + 7.3% + 2.3%

Figures not available.