Royal Ahold NV earnings miss target

U.S. supermarkets' slump noted in reporting profit of $37.8 million in 2Q

August 27, 2004|By NEW YORK TIMES NEWS SERVICE

NIJMEGEN, Netherlands - Just as its U.S. wholesale food division showed signs of recovering from an accounting scandal, Royal Ahold NV reported yesterday that its slumping U.S. supermarkets unit contributed to a lower-than-expected profit of 32 million euros, or $38.7 million.

The Dutch company also announced the resignation of Karel Vuursteen, who was chairman of its supervisory board for less than a year. Ahold said Vuursteen, 63, is stepping down for health reasons.

Ahold said its second-quarter net sales fell 5 percent, to 12.3 billion euros, year to year. The company earned 3 million euros in the second quarter of last year.

Operating income in the United States, where about 75 percent of Ahold's sales are generated, dropped 29 percent to 209 million euros ($250.8 million).

Analysts had expected Ahold to earn about 80 million euros in the second quarter, a target it fell far short of after operating income at its U.S. supermarket chains such as Giant Food Inc. of Landover, the No. 1 supermarket chain in Maryland, and Stop & Shop Supermarket Co. of Quincy, Mass., fell nearly 30 percent, to $253 million, from the second quarter last year.

The supermarkets are facing increasing price competition from discounters such as Wal-Mart Stores Inc., coupled with the distraction of a revamping aimed at consolidating overhead at some chains.

But some analysts took note of Ahold's goal to complete a merger of the backroom operations of Stop & Shop and Giant by the end of the third quarter. "They are going to have a better cost structure soon," said Lukas Daalder, an analyst with Bank Oyens & van Eeghen in Amsterdam. "Then they'll be quite capable of living with the competition and still manage to make a good profit out of the operations."

Ahold's Columbia-based U.S. Foodservice wholesaling unit, which was responsible for most of a $1.2 billion accounting scandal last year, reported yesterday that its second-quarter operating income climbed to $36 million, reversing a loss of $18 million a year ago.

U.S. Foodservice provides large-scale food catering services across the United States.

"The recovery of U.S. Foodservice is well under way and we are pleased to show a positive operating income this quarter," said Chief Executive Anders C. Moberg.

U.S. Foodservice is renegotiating vendor contracts and cutting unprofitable deals.

The accounting scandal last year resulted in Ahold's shares plummeting 60 percent, forcing the company to secure emergency loans to offset a liquidity crisis.

Ahold now faces U.S. investigations by the Securities and Exchange Commission and the Justice Department, in addition to one by Dutch financial authorities.

Ahold said that Rene Dahan, 63, a former executive vice president and director of ExxonMobil, would temporarily act as chairman, replacing Vuursteen.

Vuursteen, also the former chairman of the Dutch brewer Heineken, was scheduled to hold a news conference today.

The Associated Press contributed to this article.

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