BRUSSELS — Saying it hit upon the right balance of assortment and price, Delhaize Group's U.S. banners showed strong sales results in the fourth quarter and have continued momentum into the new fiscal year, officials said last week.
The retailer here cited a 3.9% increase in fourth-quarter sales at Food Lion, Sweetbay and Hannaford as a key factor driving quarterly and year-end operating profits that exceeded prior forecasts.
Officials cited growth of private-label items, pricing investments at Sweetbay and Food Lion, and expanded customer segmentation through store renewals as key drivers of U.S. sales. Those chains rang up combined sales of $5.1 billion in the fourth quarter and $19.2 billion for the year. Excluding an extra week in the quarter and year, they represent increases of 3.9% and 3.8%, respectively.
As previously reported, U.S. comparable-store sales, adjusted for an extra week in the 2008 quarter and fiscal year, improved by 2.9% and 2.5% for the quarter and year, respectively. Its quarter and year ended Dec. 31.
“The sales-building initiatives we started in the previous years continued to bear fruit in 2008,” Pierre-Olivier Beckers, Delhaize's chief executive officer, said in a conference call discussing results. “Special attention was paid to strengthening our price positions and developing a compelling product offering,” including the Sweet Price and Sweet Deals promotional tools at Sweetbay introduced during the summer and stepped-up price promotions at Food Lion in the fall, he added.
Holiday sales were “very strong,” the company added, “and the number of transactions increased in the fourth quarter of 2008, a clear change in trend compared to the previous two quarters … against a continuing weakening of the economy.”
Gross margin as a percentage of sales in the U.S. increased by 31 basis points to 27.7%, due primarily to an increase of private-label items in the sales mix and better inventory management at Sweetbay.
Companywide, Delhaize reported quarterly sales growth of 10.3% to $6.9 billion and annual sales growth of 5.6%, to $24.3 billion. Annual net income of $620.4 million increased 21.2%.
In other news addressed during the conference call:
The company has begun a program to integrate supply chains throughout its U.S. banners. The program will help reduce costs by $330 million in net present value, said Beckers, while providing “greater visibility on stock levels, reduced transportation cost and improved quality and freshness of our products.”
The company plans capital expenditures of $580 million to $600 million in the U.S.
It expects operating profit for the year to grow between 3.5% and 6.5% adjusted for the extra week during 2009, in part through plans to reduce companywide spending by around $127.8 million.