BRUSSELS — Countering pricing pressure with increased sales volume, Delhaize Group here drove a quarterly increase in earnings and said operating profits would be higher for the fiscal year than its previous forecasts.
For the third quarter, which ended Sept. 30, the retailer here said net profits increased 10.1% at identical exchange rates (19.3% at actual rates) on an overall sales improvement of 1.9%. In the U.S., sales of $4.8 billion decreased by 1.2% and comparable-store sales fell by 1.3%, due mainly to retail prices falling by 1.1%, the company said. Operating profits of $261 million fell 3.7%.
Delhaize fought the negative trends with targeted promotions and price investments that helped increase sales volume and store trips, officials said. And cost reductions helped the company achieve operating margins of 5.5%, down 14 basis points from the same period a year ago.
“We are encouraged to see a real volume growth on both sides of the Atlantic, reflecting our ability to retain and reinforce the loyalty of our customers and offer them the right product at attractive prices many of them are craving for in these times,” Pierre-Olivier Beckers, Delhaize's chief executive officer, said in a conference call.
Based on the results for the quarter and its performance year-to-date, Delhaize upgraded its forecast for full-year operating profits to 1% to 4%, from earlier guidance of 0% to 3%.
At Food Lion, better store signage, more aggressive everyday shelf pricing and offers such as “meals under $10” helped increase basket sizes and improved price positioning, Beckers said.
In addition, a five-store pilot program of Hispanic-focused Food Lion stores in North Carolina has been expanded to 61 stores, or about 10% of the Food Lion fleet there, Beckers said. Those stores are showing greater sales gains than the company overall.
The planned acquisition of Food Lion competitor Bi-Lo represents a “perfect strategic fit that would deliver good economies of scale,” Beckers said, but cautioned that the offer was entirely in the hands of U.S. Bankruptcy Court.
Rick Anicetti, CEO of Food Lion, said he was “pleasantly surprised” at the condition of the Bi-Lo store base.