ZAANDAM, Netherlands — The cutbacks in government spending known as sequestration have had a negative impact on sales at Giant-Landover stores in the Washington area, parent company Ahold here said Thursday.
Ahold said overall sales in the U.S. grew by 2%, to $6.1 billion, with same-store sales, excluding gas, up by 0.3%. Underlying operating income was down 4.1%, to $256 million. In a conference call with analysts, Dick Boer, chief executive officer, Ahold, said the company’s Giant stores in the Washington area have been impacted both by competitive store openings and by “pressure on spendable income in these markets” where there is a high number of government workers. Other company divisions helped offset the weakness in those areas, he said.
“We see an ongoing strong performance in the Stop & Shop New York Metro division, driven by more effective promotions with strong items and very competitive pricing and a more effective front page of the ad and good communication around these promotions,” Boer explained. “The Washington-area [Giant division] was impacted by the federal sequester. The other two markets [Giant-Carlisle and Stop & Shop-New England] performed accordingly to what we felt was, certainly in this market, achievable.”
Ahold said sales were muted by low inflation and an ongoing difficult economy.
“In the current economic environment we remain cautious in our outlook for the balance of the year, as we expect customers to be focused on value and volumes to remain under pressure,” Boer said.
Also, Ahold said it is “on pace” to achieve 40% sales share of private-label product at Ahold USA banners by 2016.
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“Currently, we are at 37%, which is a big improvement compared to 33% just two and half years ago,” said Boer, citing double-digit growth in its Nature’s Promise aisles, now located in 589 stores.
Overall Ahold said second-quarter net income was down 17.3%, to about $275 million, reflecting the sale of Ahold’s 60% stake in Scandinavian retailer ICA. Sales were up 1% at actual exchange rates (up 3% at constant rates), to about $10.4 billion.
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