BRUSSELS, Belgium -- Delhaize Group here last week said the stronger trends in sales and profits it reported in the second quarter continued in the third quarter as the company saw benefits from cost-cutting and remerchandising initiatives. The results have led it to increase its earnings guidance for the year for a second time.
In a conference call with analysts discussing its results for the period, Pierre-Olivier Beckers, president and chief executive officer, said the Delhaize Group saw improvements in its Food Lion and Kash n' Karry operations, while its Hannaford Bros. division in the Northeast continued to post comparable-store sales that rank it "at the top of the range" of results posted by other U.S. supermarkets.
Comparable-store sales for all of Delhaize America's operations were up 1% for the quarter. Operating margins also improved. Sales at the company's European and Asian divisions, which account for 20% of revenues, improved in the period as well.
The company declined to quantify the sales improvements it has seen from the marketwide remodeling program it unveiled at the end of September in the Raleigh, N.C., area, but Rick Anicetti, CEO, Food Lion, said the results have been "significantly better" than what had been planned. Another, unidentified Food Lion market has been slated to receive a similar makeover next year.
Anicetti also said Food Lion had entered an 18-month agreement with Boston Market for the restaurant chain to provide home-meal replacement products to Food Lion stores as part of an effort to boost Food Lion's prepared-foods offering. He said the tests were still in the planning stages.
Although Delhaize attributed some of the increase in sales during the third quarter to the inflation of beef prices, he noted that in some areas, Food Lion was unable to pass along to consumers the increase in beef costs.
Responding to a question about acquisitions, Beckers said the company would continue to pursue small, fill-in opportunities such as this year's purchase of 43 Harvey's stores in southern Georgia and northern Florida. That acquisition was completed on Oct. 31, after the third quarter ended. Annual sales from those stores are projected to be $300 million.
Delhaize said sales for the third quarter were negatively affected by the weaker U.S. dollar. Sales for the period totaled about 4.7 billion euros, or $5.4 billion, a decline of 7% from year-ago levels. However, organic sales growth at constant currency rates was 2.6%. Net income totaled 53.5 million euros, or about $61 million.
U.S. sales were $3.87 billion, up from $3.81 billion in last year's third quarter. Operating margins in the United States were 4.6% of sales in the third quarter of this year, vs. 4% a year ago. The operating profit grew 15.6%, to $176.4 million.
In revising its forecast upward for 2003, Delhaize said it expects sales to grow by 4% to 4.5%, up from previous projections of 2% to 3.5% growth. Comparable-store sales at Delhaize America are expected to be flat to 1% positive, vs. previous expectations that it would be down as much as 1% for the year.
Assuming identical exchange rates, Delhaize projected revised earnings gains for the year of up to 10% over year-ago levels, vs. previous projections that earnings would be down as much as 13%.