ZAANDAM, Netherlands -- Ahold put rumors about the potential resignation of its president and chief executive officer to rest last week, but the multinational retailer, based here, spawned fresh speculation about the fate of its far-flung retail empire.
In a conference call in which the company released its third-quarter earnings a week early and lowered its 2002 earnings outlook for the second time, Ahold said it was conducting a strategic review of its operations and would seek to divest those assets that it does not predict will be able to meet certain performance measures within three years. The company said it would divest all of its non-core assets and would consider disposing of the weakest of its core assets. Its core assets include its U.S. retail and food-service operations.
Some analysts speculated that the company might seek to take some aggressive action with its Bi-Lo division, perhaps closing some of the most poorly performing stores. Bi-Lo, Ahold's first acquisition in the United States, recently has been a drag on the company's otherwise stable performance in the country, where Ahold obtains nearly half of its annual revenues.
"There are some businesses we are reviewing in the context of our portfolio review in the United States," said Cees van der Hoeven, president and chief executive officer. He declined to specify which, if any, of the company's six retail banners the company might consider shedding. Some components of the company's food-service distribution arm, U.S. Foodservice, could also be a target for disposal, analysts said.
Although some trade reports speculated that the company might consider divesting Peapod, its money-losing Internet grocery arm, analysts told SN they didn't think Peapod would go on the block, citing its relatively small scale and improving performance.
Meanwhile, responding to speculation that he might resign, van der Hoeven said he offered his resignation when the company first lowered its earnings outlook earlier this year, but the board rejected it.
In the third quarter, Ahold reported sales gains of 11.5% in its U.S. retail operations, to $5.97 billion, and a 23.6% increase in operating income, to $365.3 million. Through three quarters, U.S. retail sales were up 14.1%, to $20.04 billion, and operating earnings increased 25%, to $1.16 billion. Comparable-store sales rose 0.6% for the quarter, and identical-store sales fell 0.2%.
The company said its U.S. retail operations -- which include Stop & Shop, Tops Friendly Markets, Bi-Lo, Bruno's and the two Giant Food chains, had organic retail sales growth of 3.4%. It said that operating earnings increased as a result of effective margin management and cost control, and it cited the strong performance of Stop & Shop and both Giant banners (Carlisle, Pa., and Landover, Md.).
Bill Grize, president and CEO, Ahold USA food retailing, said the economy in the Southeast has been the most difficult, although the Washington, D.C., market also has been slow because of a decline in tourism and a loss of high-tech jobs. In Tops' markets in upstate New York and northeast Ohio, the company has seen high price deflation, but Ahold has gained market share, he said. Sales were up about 5% in the Boston market during the quarter, were flat in Pennsylvania and slightly negative in the New York metro market.
Net income at the company as a whole slid 15% in the third quarter, to 257.6 million euros (about $258.5 million) on a 5.8% increase in sales, to 16.4 billion euros. Earnings per share were 0.34 euros.
Ahold also predicted that its earnings per share would be 6% to 8% lower than last year's results, vs. previous forecasts of a 5% to 8% increase.