In other Ahold news, the global Dutch retailer announced its third quarter earnings and sales, and while the results were solid there was some mild revenue slippage in theU.S.in what Boer said were continuing challenging market conditions.
In the quarter ended October 7, Ahold posted operating income of euro 289 ($367 million), a decline of 3.7 percent from the previous quarter. Total company sales were euro 7.6 billion (9.65 billion), an increase of 3.7 percent at constant exchange rates. Net income was euro 139 million ($176.5 million), down 45.9 percent (including a euro 90 millionICAtax charge ($114.3 million) and Ahold’s underlying operating margin was 4.1 percent.
Boer stated: “We continued to invest in competitiveness and gained market share in our major markets. Market conditions remained challenging, with consumers cautious in their spending and with ongoing high levels of promotional activity in both the United States and Europe. Sales growth in the United States was modest, reflecting declining retail price inflation and a strong sales quarter last year. Through stringent cost control we were able to deliver a solid margin performance. In the Netherlands we were pleased with a strong sales performance, as our value investments gained traction. Margins in the Netherlands were impacted by these investments, which were not fully offset by cost savings and by the inclusion of bol.com for the full quarter. We remain cautious in our outlook and expect market conditions to continue to be difficult. We will closely monitor the potential impact of rising food commodity costs, particularly in the United States. We are confident that we are well on track to execute our strategy and we will continue to invest in growth. We are making progress on our Reshaping Retail strategy at Ahold and continue to focus on improving our competitive position through cost reductions and overall simplification of our processes. We are on target to deliver our euro 350 ($444.5 million) cost savings program for the years 2012-2014. We continue to invest in profitable growth and act when opportunities arise.”
Highlights of its third quarter, which ended October 7, include: Giant/Carlisle completed the first full quarter of operations for the 15 former Genuardi’s stores it acquired on July 13 for $113 million in the Philadelphia market; Peapod started piloting a pick-up service in the Chicago area; Albert Heijn converted the first 14 of the 82 stores acquired from Jumbo into Albert Heijn supermarkets; the company opened its first store in Germany, an “Albert Heijn to go” convenience store in the city center of Aachen; another two Albert Heijn supermarkets opened in Belgium. Year-to-date Ahold has added six stores bringing its total number of Belgian stores to eight; Bol.com opened a specialist health and beauty internet store, and made it possible for customers to search and order using their cell phones; and Albert.nl opened its third distribution center in theNetherlandsto extend its capacity.
Furthermore, Ahold announced in the third quarter that it is exploring strategic options regarding its 60 percent holding inICA.
In the U.S., third quarter net sales were $5.9 billion, up 1.9 percent. Identical sales were down 0.2 percent (down 1.5 percent excluding gasoline), reflecting ongoing challenging market conditions, strong sales growth in the third quarter of last year, and the impact of a decline in pharmacy sales due to the conversion of brand-name drugs to generic versions.
Ahold said it achieved market share gains in both the supermarket and all outlets channel as sales benefited from itsstrong promotional activities. Underlying operating margin was 4.0 percent compared to 4.2 percent last year.
The big retailer declared it was able to largely offset the impact of both increased promotional activities, which it said were are necessary in the current economic downturn, and cost inflation in wages, pensions and insurance.
For the first three quarters, net sales were $19.7 billion, up 2.7 percent. Identical sales were up 1.2 percent (0.3 percent excluding gasoline). Underlying operating margin was 4.1percent compared to 4.3 percent last year.