AMSTERDAM — The continuing recovery at Stop & Shop and Giant-Landover highlighted a strong first-quarter performance at Ahold, although a charge for lease guarantees at former chains Bi-Lo and Bruno's sank net earnings, the retailer here said last week.
Net income in the first quarter, which ended April 19, was down 25% to about $271.6 million, mainly as the result of a one-time charge of $91 million to cover lease obligations at Bi-Lo and Bruno's, the former Ahold chains now in separate Chapter 11 cases. Operating income was up 17.9% overall, led by a 19.8% increase at Stop & Shop and Giant-Landover. Those chains posted combined sales of $5.3 billion — a 3.6% increase — during the quarter as consumers continued to respond positively to a program of lower everyday prices and renovated stores. Excluding fuel, identical store sales improved by 4.8% at Stop & Shop and by 3.6% at Giant-Landover, the company said.
Giant-Carlisle posted sales of $1.5 billion, an increase of 3.4%, and non-fuel identical-store sales gains of 4.3%. Operating income at that chain was down slightly as a competitive environment in Pennsylvania drove promotions.
John Rishton, chief executive officer of Ahold, described a “cautious” consumer environment where shoppers are making more trips but spending less per visit, particularly at Giant-Carlisle.
“Is that a significant trend? Is it something I'm losing sleep about? No,” Rishton said. “It is nothing more than we expected, frankly. And we are confident we are prepared to adapt to that changed behavior.”
Having strong momentum entering the recession has continued to benefit Stop & Shop and Giant-Landover, which gained sales and share during the quarter, Rishton said.
Those chains are recovering from years of sales declines behind a program of everyday price reductions and new branding initiatives. Rishton said competitive responses have been tactical rather than strategic. “We've seen short bursts of [competitive] activity, but nothing that I would regard as being structural changes [from competitors].”
While Stop & Shop and Giant-Landover are seeing their first comparable-store gains in more than five years, more opportunity may arise through store closures and potential bankruptcies among competitors, according to Matthew Truman, an analyst for Nomura Securities, London.
“The double growth opportunity of falling capacity and clawing back what was rightfully theirs in market share offers a genuine upside to forecasts,” Truman said in a research note. Giant-Landover, he said, has lost compound comparable sales of about 15% since 2004.
Giant and Stop & Shop “still have significant growth opportunities” through avenues such as private label, said Rishton, but he did not rule out growing through acquisition.
“We'll continue to look for opportunities where we believe the capabilities and skills we have can generate profitable growth,” he said.
The Bi-Lo and Bruno's charge relates to lease obligations on various stores in those chains, which Ahold sold in 2005.
