ZAANDAM, Netherlands -- Ahold here said its performance in 2003 would be negatively affected by activities surrounding its massive financial scandal, which was in large part related to overstatements of vendor allowances at its food-service division in the United States.
Also, after reporting earlier this month a loss of $1.4 billion for fiscal 2002 using Dutch accounting standards, Ahold revealed that the loss using U.S. accounting rules was 4.33 billion euros, or $5.1 billion. Most of that loss related to the writedown of goodwill for the U.S. Foodservice subsidiary.
Analysts said the loss was primarily an accounting issue, and was not indicative of the company's core performance. Ahold had previously stated that the loss would be much greater using U.S. accounting rules than using Dutch rules.
"Of course it was a very large loss, and that number did circulate in the financial community," said Jens Jantzen, an analyst in the London office of Bear Stearns. "But people did realize that it was more accounting than anything else."
In its much-delayed annual report filed with the Securities and Exchange Commission, Ahold said its sales this year would be "negatively affected by the weakened global economy and strong competition," as well as "diversion of management" because of the financial scandal, which came to light in February. Sales also will be lower in 2003 because of divestitures, Ahold said.
The company also said its operating expenses "will be significantly higher" this year in part because of the costs involved in the accounting and legal investigations related to the scandal. The new accounting controls the company has implemented are also adding costs, the company said. Ahold also expects increases in employee benefit costs this year.
The company said it expects U.S. retail sales to increase "modestly" in 2003, with the strongest performance coming from its Stop & Shop and Giant-Carlisle divisions, based in Quincy, Mass., and Carlisle, Pa., respectively. Bruno's, Birmingham, Ala., and to a lesser extent, Giant, Landover, Md., and Tops, Buffalo, N.Y., "have been experiencing pressure on net sales in 2003," the company said.
"I do think they are seeing pressure in the Southeast," said Jantzen of Bear Stearns. "That pressure that they mentioned in the 2002 report has continued in 2003. I don't see any reason why the Wal-Mart or Winn-Dixie competition has decreased. I think it has actually increased a little bit."
Ahold also said it has completed the previously announced sale of Golden Gallon, its 138-unit convenience-store chain, to The Pantry, a Sanford, N.C.-based C-store operator, for about $187 million.