Giant Food's parent reports flat sales

August 11, 2006|By BLOOMBERG NEWS

LONDON -- Royal Ahold NV, the owner of Giant Food supermarket chain and Columbia's U.S. Foodservice, said yesterday that its sales growth stagnated in the second quarter as competition with Wal-Mart Stores Inc. and Kroger Co. intensified.

Revenue was 10.5 billion euros ($14 billion), compared with 10.4 billion euros in the quarter last year, the Dutch company said.

Increased discounting and a wider product offering at rival chains are hurting its U.S. businesses, which account for two-thirds of sales, the company said.

High energy costs also are affecting consumers' spending, the company added.

Chief Executive Officer Anders C. Moberg, who cut his annual sales forecast in half earlier this year, is conducting a review of unprofitable units.

"The update signals tougher times ahead," said Christopher Gower, an analyst at Man Securities in London, who has a "sell" rating on the stock. "A reinvestment in price will offset an upside in margins."

Ahold has said it must cut prices, add private-label goods and remodel stores to revive U.S. sales growth. Moberg also plans to offer more general merchandise and open more stores in high-income areas of cities such as New York.

Ahold agreed last month to sell 46 Tops stores in Ohio, allowing it to focus on the Tops supermarkets in New York and Pennsylvania.

Sales fell 0.2 percent at Giant-Landover stores open at least a year and dropped 0.4 percent at Stop & Shop in New England, Ahold said. At Tops, sales decreased 4.5 percent, while Giant-Carlisle sales rose 7.3 percent, helped by refurbishment.

Sales at distributor U.S. Foodservice rose 2.3 percent to $4.4 billion.

Moberg was hired as CEO in 2003 to restore investor confidence after an accounting scandal at U.S. Foodservice.

Ahold's earnings increased 76 percent in the first quarter as profit at the distribution unit improved. Sales in the first quarter rose 8.6 percent to 14.1 billion euros.

Ahold's U.S. shares gained 31 cents to $9.13 on the New York Stock Exchange.

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