SALISBURY, N.C. — Delhaize America, the U.S. division of Delhaize Group, saw a decrease in underlying operating profit prompted by soft sales, an increase in operating expenses to support growth projects and price investments for fourth quarter 2011.
Despite revenue increasing to nearly $4.8 billion for the quarter, compared with $4.72 billion in the year-ago period, Delhaize said underlying operating profit decreased by 20.3% to $243 million, while underlying profit margin was 5.1%, compared with 6.5% in 2010. Meanwhile, the company said its operating margin was 1.6% due to $183 million in impairment charges that were related to the portfolio optimization, which included the expansion of Bottom Dollar Food and the repositioning of the Food Lion banner.
Despite challenging economic conditions, the overall year, however, proved positive. Revenue for Delhaize America increased 2.2% to $19.2 billion, while comparable-store sales rose 0.7%. The company operated 1,650 supermarkets in the United States for the year, as a result of the opening of 33 stores (13 of which were Bottom Dollar Food stores) and the closing of 10 stores, which resulted in a net addition of 23 stores to the U.S. network.
“We remained focused on the execution of our New Game Plan throughout 2011, launching a number of growth initiatives across the group, designed to strengthen the foundation of our business and support its growth potential," Delhaize Group CEO Pierre-Olivier Beckers said. " At Food Lion, where repositioned stores in the Raleigh market recorded positive volume growth since their launch in May 2011, we are determined to move faster with the repositioning of our brand and implement it in 600 to 700 additional stores in 2012. During the fourth quarter of 2011, the revenue growth in our other U.S. markets was impacted by our decision to pass on cost inflation to retail prices in the face of a very competitive environment. While soft revenues and costs related to our growth initiatives in the U.S. negatively impacted our fourth-quarter results, we are convinced that the projects we are focusing on are the right ones for our company. With Bottom Dollar Food, we have developed a growth vehicle for the U.S. The growing revenue momentum we have experienced in the Philadelphia market during 2011 indicates to us that we will be able to significantly grow this format. Our recent successful entry in the Pittsburgh market further confirms our outlook.”
For 2012, Beckers said the company will continue its price competitiveness, leverage its private brands, open more stores and boost store remodels as well. "Each of these initiatives will support our plan to accelerate revenue growth as defined by our New Game Plan," he said.