Ahold Cites Economic Pressures

Ahold here last week said deflation, consumers trading down and increased promotional activity pressured fourth-quarter profitability and sales, although the company was able to drive gains at some divisions with a balance of price and margin. Operating income at the company's Quincy, Mass.-based Stop & Shop/Giant-Landover division rose 15%, to $238 million, and full-year operating income

AMSTERDAM — Ahold here last week said deflation, consumers trading down and increased promotional activity pressured fourth-quarter profitability and sales, although the company was able to drive gains at some divisions with a balance of price and margin.

Operating income at the company's Quincy, Mass.-based Stop & Shop/Giant-Landover division rose 15%, to $238 million, and full-year operating income at the division rose 24%, to $869 million. As previously reported, sales for the year were up 4.6% at the division, to $17.9 billion, including an extra week of sales in the most recent fiscal year. Adjusted sales rose 2.6%.

At Giant-Carlisle, strong competitive pressures in the weak economy helped drive operating income down 10% to $54 million for the fourth quarter, after restructuring and related charges of $1 million. Operating income for the year was $218 million, down 6.4% compared with the preceding year. Sales were up 15% in the fourth quarter, to $1.3 billion, and 4.6% for the year, to $5 billion. Adjusted for the extra week, sales for the quarter and year rose 6% and 2.6%, respectively.

The company said the integration of Ukrop's Super Markets in Giant-Carlisle was progressing smoothly, although it noted that the acquired stores were not profitable. The company's Stop & Shop division also recently announced the acquisition of five Shaw's.

“While the Ukrop's and Shaw's deals in themselves are small, they're a good indication of the opportunities available in the current environment,” said Jon Rishton, chief executive officer.

Giant-Carlisle also plans to launch a second Giant To Go convenience-focused store in 2010.

“The first [Giant To Go] has been as much a laboratory as it has been a sort of proposition on its own,” Rishton said. “We learned an enormous amount from it. We still think that the whole convenience segment for some of our customers' needs is a significant one and an important one.”