AMSTERDAM - Ahold here said improving performance at Giant Foods of Carlisle, Pa., and Giant Foods of Landover, Md., helped boost financial results for the second quarter - with the pending acquisition of 14 Philadelphia-area stores from Clemens Markets, Kulpsville, Pa., likely to enhance results at Giant-Carlisle going forward.
Speaking with analysts in a conference call last week, Anders Moberg, chief executive officer, said Ahold is making progress on efforts to sell 46 Tops stores in northeastern Ohio, with a transaction likely to be completed by the end of the year.
He also said the company is continuing its strategic review of its operations. Despite repeated attempts by analysts to get a reading on what Ahold's decisions might be, Moberg would not give any hints. "We are focused very much on where we would like to take the company, and we will come out with a review and how we go forward with the company this fall," he said.
The second-quarter results "provide management support for implementing its strategy and reduce the pressure for a full break-up," said Patrick Roquas, an analyst at Rabobank here.
Two investors have recently called for Ahold to split its U.S. and European businesses, but Roquas said he thinks Ahold will eventually seek to dispose of only parts of those businesses, including possibly Tops, its Central European business and U.S. Foodservice.
He noted that second-quarter cash flow was "20% above our projections and fully driven by better-than-expected results at U.S. Retail and Albert Heijn," the company's banner in the Netherlands.
Moberg, however, said Ahold is concerned with its second-half prospects in the Northeast due to rising fuel prices, increasing interest rates and falling housing prices. He said the new pricing program scheduled to launch in Stop & Shop/Giant-Landover is showing "promising results so far."
Moberg credited performance gains to rising gross margins and improved shrink control at Giant-Landover and the 50th consecutive gain in same-store sales at Giant-Carlisle.
In the U.S., sales for Ahold's retail and food-service segments rose 0.9% to $9.7 billion for the quarter.
In the U.S. retail segment, sales at Stop & Shop/Giant-Landover rose 1.3% to $3.9 billion for the quarter, while sales at Giant-Carlisle/Tops fell 3.9% to $1.4 billion. Comparable-store sales fell 0.2% for the quarter at Stop & Shop; 0.4% at Giant-Landover; and 4.5% at Tops. Comps at Giant-Carlisle rose 7.3%.
Overall net income at Ahold rose 60% to $279.1 million for the quarter and 70% to $592.7 million for the half, while sales rose 0.3% for the quarter to $13.4 billion and 4.9% for the half to $31.3 billion.
Once the acquisition of the 14 Clemens has been completed - probably in the fourth quarter - Ahold said it plans to convert 13 of the stores to Giant and retain a store in Bryn Mawr, Pa., under the foodsource banner. Eight other Clemens stores are being sold to C&S Wholesale Grocers, Keene, N.H. - Giant's wholesaler - or to C&S affiliates or customers. Clemens has been a Supervalu customer, but the stores will switch to C&S.
Clemens will continue, at least for now, to operate a single conventional store in Hilltown, Pa. It also operates two licensed Save-A-Lots.
Jack Clemens, CEO, said he sold the stores "because the area has become very competitive, and we wanted to make sure all our employees had a stable future."
The Clemens stores Ahold is acquiring are smaller than Giant's norm - 30,000-50,000 square feet, compared with 55,000-71,000 square feet - "but they are in outstanding locations 10-20 miles outside of Philadelphia, in areas where we do not have stores, and one of the great advantages of this transaction is it puts Giant into some great locations," Denny Hopkins, vice president, advertising and marketing, told SN. "Our plan is to close the stores for three or four days, then reopen for the holiday period, and then assess each store next year and determine if we want to put capital into it."