Smith also summarized the organizational changes he has made since his tenure began: “As you may have read, we restructured our organization above the store level to improve our efficiency and to create a more effective organization that is capable of competing and reacting to the changing environment in which we operate.”
In Smith’s reorganization, he made several changes to his senior management team in January. All positions were filled from within the existing organization with the exception of a chief people officer, which is still currently unfilled. Smith also reduced the number of officers in the company by 25 percent and relocated the majority of the senior leadership team to the company’sSalisbury,NCheadquarters. Previously, some of those posts were located in the retailer’sScarborough,MEoffices. Smith also eliminated about 450 positions above store manager level, and closed 45 Food Lion, Sweet Bay and Bottom Dollar Food stores in early 2013. Smith said, “We believe this new organizational structure is both more efficient and effective, and this will result in significant costs savings that we can reinvest.”
The retailer’s fourth quarter 2012 and year end results illustrate the urgency for improvement. In the fourth quarter, revenues at DelhaizeAmericadecreased by 2.5 percent to $4.7 billion. Comparable store sales were flat. The retailer said that volume growth was positive as a result of the Food Lion grand repositioning, continued price investments at Hannaford and the expansion of Bottom Dollar Food, but underlying operating profit decreased by 35.7 percent to $156 million mainly due to a decrease in gross margin resulting from the price investments. Underlying profit margin for the quarter was 3.3 percent compared to 5.1 percent in 2011.
For the full year, revenues forU.S.operations dropped 2.2 percent compared to 2011. Revenues for the full year were $18.8 billion and comparable store sales decline 0.8 percent During the year, 537 food Lion stores were impacted by brand repositioning.
Underlying operating profit for theU.S.division in 2012 decreased to 3.8 percent compared to 4.8 percent in 2011, mainly as a result of price investments. Underlying operating profit dropped by 23.5 percent to $705 million. Operating margin was 2.3 percent, mainly as a result of $249 million impairment and store closing charges.
In the second quarter of 2013, the retailer expects to launch the rebranding of the remainder of its Food Lion stores, approximately 180 units mainly in the Baltimore/Washington markets. The results at those units, as well as improved price competitiveness at Hannaford and cost savings throughout the company’s American operations, as well as improved results at Bottom Dollar Food and Sweetbay, are expected to partly help fund planned price investments.
Beckers commented on the 2012 results: “As indicated in January, our financial results in 2012 were within guidance. We are particularly pleased by our strong free cash flow generation
and we believe that we will generate an average of approximately €500 million free cash flow per annum over 2013-2015.”
He added, “In 2013, we will remain focused on accelerating the progress at Food Lion, revitalizing Delhaize Belgium and driving growth in Southeastern Europe. We remain encouraged by the continuation of several positive trends we experienced during the fourth quarter of 2012, particularly in the U.S. Over time, we believe that Delhaize Group has the ability to improve its operating performance in all of its markets, by staying focused on sustainable revenue growth and strict cost management.”