BRUSSELS - Delhaize here said last week it would boost capital expenditures for its U.S. operations by about $150 million, to $700 million, in fiscal 2006, mostly because of the large number of Kash n' Karry stores it is converting to Sweetbay in Florida.
As previously reported, the company is stepping up the rate of conversion of the stores this year, and expects to recast 46 Kash n' Karry stores as Sweetbay and build two new ones by the end of 2006, for a total of 73 by year-end, including stores previously converted.
"This is triple the amount of conversions that we've had in any one year since we've started this process, and there's a cost that goes with that," said Ron Hodge, chief executive officer, Hannaford Bros., which also oversees Sweetbay.
About 30 stores will be left to convert in 2007.
The company also is speeding up expansion of the Hannaford banner, he added, with 14 new stores planned in 2006.
The company expects cap-ex as a percent of sales to remain high in the coming years, said Pierre-Olivier Beckers, president and CEO, Delhaize.
"We will continue to invest at a much higher degree than we did in '03, '04 and even '05 because we are investing in the renewals of our markets and in the growth of the network at the same time," he said.
The company said its market renewal program at Food Lion, in which it remodels an entire market at one time, is helping drive sales growth, but it said same-store sales were positive last year even at the 900 or so stores that were not part of the renewals. Delhaize also said it is continuing to see sales growth in the markets where it first invested in the renewal program, Raleigh and Charlotte, N.C.
The company also said it would begin testing a Bottom Dollar loyalty-card program when it opens its fourth store under that banner next month.
Delhaize posted fourth-quarter net income of about $140 million, up 66.7% at identical exchange rates, on sales of about $5.92 billion, up 5.3% vs. year-ago results. U.S. same-store sales were up 2.5% for the fourth quarter and 1.1% for the year.
Net income for the year totaled $348 million, up 23.6%, on sales of $22.3 billion, a 4.1% increase.
The company attributed some of the fourth-quarter gains to the closure of several Winn-Dixie stores last year.