Taking Stock

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At Ahold, The Numbers Indicate A Different Story

About 110 miles northeast of Brussels, Amsterdam based Ahold released its second quarter earnings and sales for the period ended July 15. Helped by its large U.S. platform (which controls about 62 percent of Ahold’s total sales), the retailer’s numbers were dramatically different from Delhaize’s.

The Dutch based retailer saw increases in overall sales, ID revenue and earnings.

And while improvements can still be made in communication and execution between vendors and category managers and also between its corporate infrastructure based primarily in Carlisle, PA and its four operating divisions, Ahold is clearly in a position to attack, not reposition.

At its 765 U.S. stores, the company’s profit increased 10.6 percent to $261 million and its operating margin was a healthy 4.3 percent (up from 4.1 percent in the corresponding quarter last year). Overall sales were $6 billion, a 3.4 percent gain over last year’s performance. Identical store revenue grew 2.2 percent (ex-gas).

While Ahold CEO Dick Boer was pleased with his company’s second quarter performance, crediting strong margins gained through “stringent cost control,” he, like many other grocery leaders, expressed caution about market conditions for the remainder of 2012.

“We expect market conditions to remain difficult and are cautious about the potential impact of rising commodity costs, particularly in the U.S…we are confident that we are well on track to deliver on our strategy and we will continue to invest in growth,” the Dutch executive stated.

In fact, Boer added that he was pleased with the addition and conversion of the recently acquired (by Giant/Carlisle) 15 former Genuardi’s units (final cost: $113 million). During fiscal 2012, in addition to the Genuardi’s purchase, Ahold has spent about $835 million to expand its organization. It has acquired three former Fresh & Green stores in the Baltimore area (Perry Hall opened on August 24) and has also acquired a Dutch retail competitor and a Netherlands based Internet firm.

But with about $3 billion in cash reserves, we expect Ahold to continue to look for more opportunities to grow its retail empire, particularly in the U.S. where acquisition opportunities should be readily available in the next two years.

Specifically, while I don’t expect Delhaize to be a player in the sale of certain Supervalu assets, I fully expect Ahold to pursue such potential opportunities as well as taking a hard look at A&P’s store base, should a sell-off present itself.