Dutch parent of Giant, U.S. Foodservice, sees 56% gain in quarter

Ahold also predicts 15% rise in profit per share this year

March 07, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Dutch food retailer Royal Ahold NV saw fourth-quarter profit soar 56 percent, thanks in part to two Maryland subsidiaries, U.S. Foodservice and Giant Food Inc.

The world's third-biggest supermarket operator also announced yesterday that it expects a 15 percent increase in earnings per share in 2001.

For the last three months of 2000, net income surged to 370 million euros ($345 million), up from 237.2 million euros, the retailer said. Earnings per share climbed 29 percent to 46 euro cents a share, beating analysts' estimates. At a constant U.S. dollar exchange rate, earnings per share rose 15 percent.

Profit for the year rose 48.4 percent, to 1.1 billion euros ($1 billion), or 1.51 euros a share, compared with 752.1 million euros in fiscal year 1999, the company said.

The end of 2000 marks the 13th consecutive year in which net profit has grown significantly, and Ahold has met or exceeded expectations, the company said.

Sales rose 78 percent in the fourth quarter, to 15.3 billion euros ($14.3 billion) and 56 percent in 2000, to 52.5 billion euros ($49 billion).

Sales were up at all of Ahold's U.S. chains, particularly Giant Food in Landover, which Ahold acquired in 1998, and Stop & Shop, which operates stores in New England. Ahold also owns Tops, BI-LO and Giant of Carlisle, Pa. Ahold is also the majority shareholder in Peapod, the leading U.S. Internet grocer.

The supermarket operator acquired 17 companies last year in the United States, Europe and Latin America, expanding into the food wholesale business with last year's takeover of U.S. Foodservice in Columbia.

"Ahold has a great track record at integrating companies," said Folkert Jan van der Veer, an analyst at Effectenbank Stroeve in Amsterdam who has an "outperform" rating on the stock. "They will definitely reach 15 percent [earnings] growth."

The 2000 results show that the company is on the right track with its multichannel strategy - both food retailing and food distribution, said Cees van der Hoeven, Ahold's president and chief executive officer.

"We have seen strong organic sales, and organic earnings growth, while all new acquisitions have performed very well," van der Hoeven said.

He expects sales to reach 65 billion euros by the end of this year, far ahead of the goal.

"We planned to double the size of our company between 1999 and 2002, but it now looks as if we will almost reach that goal by the end of 2001," van der Hoeven said.

Ahold says a great deal of its success lies in the U.S. market, which represents more than half its sales, said Hans Gobes, an Ahold spokesman.

U.S. sales rose 36 percent to $27.8 billion in 2000 and 54 percent in the fourth quarter, to $7.6 billion.

The large increase in U.S. sales comes in part from the acquisition of U.S. Foodservice, which supplies restaurants and institutions with food and supplies.

"U.S. Foodservice has exceeded our expectations," Gobes said yesterday from the company's base in Zaandam, the Netherlands.

"It really has showed itself as an excellent company at an activity that complements our food retailing operations in the U.S."

Because U.S. Foodservice and the supermarkets in the Ahold's U.S. division buy merchandise from the same manufacturers, the company has been able to increase its buying power, he said.

Ahold, which runs 8,500 supermarkets, hypermarkets (where food and clothing are sold) and other formats in the United States, Europe, Latin America and Asia, does not break out sales of individual supermarket chains.

The company said sales at Ahold-owned U.S. supermarkets open at least a year rose 2.8 percent in 2000 and 4.1 percent during the fourth quarter.

Excluding the Edwards chain, all the Ahold chains showed market share gains, improved operating margins, improved cost controls and synergy benefits.

During the second half of the year, 63 Edwards stores were converted to the more successful Stop & Shop format. Peapod, the company's Internet grocer, had an operating loss of $32 million.

"Profit growth in the coming years will depend on Ahold's acquisitions strategy," said van der Veer, the analyst.

Ahold's American Depository Receipts s fell 37 cents yesterday, closing at $32.65 on the New York Stock Exchange.

Bloomberg News contributed to this article.

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