SALISBURY, N.C. — Delhaize America, the U.S. division of Delhaize Group, reported a decline in its underlying profit declined due to a decrease in gross margin resulting from price investments, as well as the impact of closed stores, as part of the company's portfolio optimization.
Revenues for the first quarter slid 1.2% to $4.6 billion, the company said, noting that when excluding the impact from the 126 stores the company closed in February, total U.S. revenues instead increased 0.7%. Comparable-store sales evolution declined 0.6%, the company said.
Meanwhile, underlying operating profit decreased by 21.7% to $173 million. Underlying operating margin was 3.7%, compared with 4.7% in the year-ago period. Excluding its Bottom Dollar Food banner, underlying operating margin for Delhaize America was 4.3%.
At the end of March 2012, Delhaize Group operated 1,541 supermarkets in the United States, a decrease of 94 stores, compared with March 2011, due to the closing of 126 stores earlier this year, partly offset by the expansion of Bottom Dollar Food, which Delhaize America said continued to experience strong revenue growth and that the Philadelphia and Pittsburgh markets "have generated revenues above [our] expectations." Delhaize America also noted that Food Lion's brand repositioning is moving ahead with "accelerated momentum," as comparable store sales growth and volume growth were 2.9% and 1.8%, respectively, for its phase-one stores. Phase-two stores, which include 250 locations in Norfolk, Richmond, Roanoke and Lynchburg, Va., markets that launched in late March, also enjoyed significant increases in both sales and transactions. Phase-three of the banner's brand repositioning, which consists of approximately 260 stores, will be launched on schedule by the end of the summer.
Commenting on the results, Delhaize Group CEO Pierre-Olivier Beckers said the company continues to deliver its New Game Plan and remains committed to price competitiveness, particularly for the company's Food Lion banner, "with the progressive rollout of our brand repositioning."
“These actions and the current trading environment translated into lower underlying operating profit in the first quarter of 2012," Beckers said. "In order to fund our long-term growth initiatives and to further invest in our prices in several of our markets, particularly the U.S. and Belgium, we will increase our focus on the generation of free cash flow through a more disciplined approach to capital expenditures and improvements in working capital."