Giant 4Q sales are down

Ahold encouraged by price-cut results

March 23, 2007|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Sales at Giant Food declined yet again in the fourth quarter of last year, but the grocer's parent company said that it has seen positive results from a price reduction program it recently implemented at the supermarket chain.

Dutch food company Royal Ahold NV, which owns Giant, also said plans to sell Columbia-based U.S. Foodservice, the food distributor it also owns, are on track for later this year.

"It's good to be a seller when there is a lot of interest," Ahold President and CEO Anders Moberg said in a conference call with analysts yesterday. He declined to provide details about potential buyers for the division, which faced an accounting scandal three years ago.

Fourth quarter sales at Giant declined 1.8 percent from the corresponding period last year - Ahold does not detail total sales for each grocery division. Net sales at U.S. Foodservice increased 5.1 percent to $4.4 billion. Operating income was $81 million compared with a loss of $9 million in the corresponding quarter a year ago.

For the entire company, Ahold said it earned $319 million in the quarter compared with $144 million a year ago. Sales were down 3 percent to $13.9 billion.

Giant sales and market share have slipped in recent years as it has faced stiff competition from grocers such as Wegmans Food Markets Inc., which has moved into the region. More competition is on the way as Wal-Mart Stores Inc. recently announced it was bringing four new Supercenter stores with supermarkets to the area.

Under what it calls a "value improvement plan," Giant recently introduced a new store prototype and has lowered prices on some products, including produce, baby items, household merchandise and paper goods to better compete. Ahold officials said it was too early to say whether the program increased sales but that customer perceptions of prices and the quality of its produce has improved.

"The real measure is how we are changing consumer perception, which ultimately translates into more trips, more customers and higher average" spending, said Larry Benjamin, chief operating officer for the U.S. division.

The company has implemented the value program for 15 percent of the items in its stores and plans to lower the prices of 75 percent of all items by the end of next year.

Giant also has been renovating stores and building new locations. It recently opened a 56,000-square-foot store in Urbana in Frederick County and completed renovations at a store in Bear, Del. It also announced it was closing five older regional stores, including three in the Baltimore area, after the Easter holiday. Giant also is shifting the floral and seafood departments at some of its stores to self-service.

"Customers are reacting positively to the improvements we have made," Moberg said.

Moberg said Giant Landover and its sister company Stop & Shop in Massachusetts are keys to improving sales in the United States. Sales at the division have been sluggish in past quarters.

"It is the most important thing we have to improving the results of the group," Moberg said.

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