What is in this article?:
- Food Lion Cuts Promotions, Cites Pricing Progress
- 'Except for Price'
“We want to change the mix of how we present ourselves with prices, with a reduced mix of promotions to increase the more competitive everyday shelf prices across the whole assortment.”
— Pierre-Olivier Beckers, president and CEO, Delhaize
'Except for Price'
In the meantime, officials have begun making more investments in price and promotions at Hannaford Bros. stores, acknowledging that shoppers had lost confidence in its prices amid new competition and a slow economy in its Northeast markets.
“Hannaford is a very strong brand. It has a strong equity, and consumers continue to tell us that we are delivering on all of what we call the universal needs, except for price,” Beckers explained. “And it’s clear that in an environment where consumers are under pressure and where we also see the arrival of some price operators like Market Basket and ShopRite that have opened a few stores in our environment, we have to fight with every tool we have to maintain competitiveness, much more promotionally in this case.”
Read more: Delhaize Taps Smith as U.S. CEO
Overall, U.S. sales declined 2.4% to $4.8 billion in the quarter, and comparable-store sales were down 1.6%, officials said. Mainly as a result of price investments, U.S. profit margins sunk by 50 basis points to 4.6% of sales, and U.S. operating profits tumbled 12.3% to $219 million in the quarter, Delhaize said.
The additional investments in price at Hannaford led officials to “significantly reduce” bonus accruals for U.S. officials, noting that the company was unlikely to meet profitability targets related to bonuses during the fiscal year. Beckers, however, reiterated the company remained on track to reach the low end of guidance toward an operating profit decrease of 15% to 20% in the fiscal year.
The fourth quarter, he added, is likely to be another difficult one for margins, as price investments continue. While he declined to provide margin guidance for 2013, asked by an analyst if he was willing to see margins fall further to keep sales growing, Beckers answered in the affirmative.
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