TAMPA, Fla. — Delhaize Group said Thursday that it would close 33 Sweetbay stores here by next month, or about one-third of the chain.
“While these decisions are difficult, especially given the impact on our associates, customers and communities, these actions will continue to enhance the performance of our overall store portfolio and further enable us to deliver profitable growth and accelerate shareholder value,” the company said in a statement. The company also said Thursday it would close eight Food Lion stores, and three Bottom Dollar Food stores.
Sweetbay will operate 72 stores after the closures, which are expected to be complete in mid-February. In addition to the store closures, Sweetbay will also discontinue its pharmacy operation at its Bonita Springs, Fla., store.
The closures are expected to displace approximately 2,000 employees.
In a conference call discussing fourth-quarter revenue results Thursday, Pierre Bouchut, Delhaize Group’s chief financial officer, said the closures would eliminate those stores operating at a loss in the Sweetbay banner, but said it was the “first step” toward additional changes at Sweetbay. The elimination of the money-losing stores is expected to provide a $40 million benefit to underlying profits annually, officials said.
“We decided to close the loss-making stores, and we believe that this is a sensible decision,” Bouchut said. “Regarding the strategy on the remaining stores and how it fits within Delhaize, we thought strategically about this. And what we are announcing today is a first step to stop the bleeding at loss-making operation, and definitely over time a more structural solution for the rest of Sweetbay would be a logical step.
“But Sweetbay is already cash positive, excluding the losses of those loss-making stores, and all things being equal, Sweetbay would be profitable in 2013,” he added. “But naturally, as you know, it needs to close a significant gap to get to the level of the other operations of in America.”
Delhaize said it would take a charge of around $520 million (U.S.) to earnings, most in the fourth quarter, to cover store closure costs as well as impairment charges at its Maxi banner in Europe.
Although the company said it would release sales figures and financial results for the quarter and fiscal year in March, it said underlying profits for the year would be down by 17.5%. Fourth-quarter sales improved by 0.3%, helped in part by improving results at 700 Food Lion stores to have completed price and service investments under its rebranding program.
Transactions (up by 3.5%) and items per trip (1% growth) at rebranded Food Lion stores improved sequentially from the third quarter and are outperforming the 424 stores yet to have received rebranding initiatives by 5.7%.
Borchut said sales were especially good in two test markets where Food Lion stores have lowered dairy and frozen prices most aggressively. Those categories combine for around 20% of Food Lion’s overall sales.