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Food Lion Abandons Test of Fewer Promotions

SALISBURY, N.C. — Food Lion officials said Thursday that the chain was discontinuing a test of reducing promotions in favor of lower shelf pricing launched late last year in the dairy and frozen departments of some stores.

Roland Smith, chief executive officer of Food Lion parent Delhaize America here, said the test did not result in volume increases that were as high, or as widespread, as officials had hoped when it launched the four-month test in October. “I can confirm that we saw some clear volume increases and we saw some nice customer response, these volume increases were not across all of our categories and they were not to the level that we were hoping for,” he said.

Read more: Delhaize Eliminates 500 Jobs as Part of Broad Restructure

The program was meant to defend the price positioning achieved during the rebranding initiative at Food Lion stores, which included investments in lower everyday prices along with increases in service and quality. Officials in November had said the company intended to expand the program to additional categories, but Smith said Thursday that Food Lion had decided against expansion.

Smith’s remarks came as officials reviewed financial results for the fourth quarter and fiscal year that ended Dec. 29. Costs of store closures and decreased margins as a result of price investments triggered underlying profits at Delhaize’s U.S. operations to decline by 17.5%, officials said, confirming preliminary figures announced in January. In the fourth quarter, U.S. sales decreased 2.1% to $4.7 billion, but increased by 1.4% when excluding the 126 stores that closed a year ago. Comps were flat, and underlying profits decreased by 35.7%.

For the year, U.S. sales decreased 2.2% to $18.8 billion but increased by 0.9% when excluding closed stores. Comparable-store sales decreased by 0.8%, and gross margins slid by 107 basis to 26.2% of sales, reflecting price investments and the negative impact of store closures.

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