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“Retailers were achieving decent, nominal sales and earnings during the second half of 2011, though there was actually a slowdown in real sales growth because of inflation.”
— Andrew Wolf, BB&T Capital Markets
The second half “was a period of tough sledding for the industry as a whole because inflation was running amok."
— Scott Mushkin, Jefferies & Co., New York
Ahold USA, Delhaize America
• Ahold USA, Quincy, Mass., whose second-half sales rose 7.3% to $11.7 billion, with comps up 6.8% in the third quarter and 2.9% in the fourth, while operating profit rose 22.9% to $462 million in the half.
Wolf said Ahold USA has taken a page from Kroger “in terms of getting serious about selling value over the last few years, and by the second half of last year, Ahold was at the point where it was beginning to reap the benefits of several years of price repositioning.”
Katie Mathis, a retail analyst for Planet Retail, London, said Ahold USA’s sales rose during the half “on the back of infill acquisitions and a focus on lowering costs and reducing debt, which allowed for better synergies across banners with a sophisticated private-label program.”
Patrick Roquas, an analyst with Amsterdam-based Rabobank, said Ahold had a sound second half, “reflected by market-share gains and a higher underlying EBIT margin — the result of its ongoing focus on cost savings, price investments, investments in the store base and the rollout of own brands. The Ahold banners also benefited from operational and financial issues at some of its local peers.”
• Delhaize America, Salisbury, N.C., where second-half sales were up 2.3% to $9.7 billion, comps rose 1.9% in the third quarter and declined 0.4% in the fourth, and operating income fell 9.7% to $495 million.
According to Mathis, Delhaize struggled during the half from “a combination of underperforming store locations and store formats that don’t fit the current economic climate. It was not competing on price in the majority of its banners, and it failed to provide the store environment and customer service shoppers expected from those price points,” she said.
According to Giblen, “Delhaize is harvesting high prices and suffering the consequences in terms of comp sales,” with Food Lion being negatively impacted during the half by competition from dollar stores, and Hannaford Bros. in the Northeast encountering more competition from supercenters and Wegmans Food Markets.
“For a company that goes to market on price, Food Lion has really been one of the last of the large chains, along with Supervalu, to look at price and adjust downward to protect its market share,” Wolf said. “It’s making those adjustments on a market-by-market basis now, and I would expect to see a lot of price investment this year.”
According to Mushkin, “Food Lion is adrift. It’s trying to get pricing in line, but the results don’t show it, and it still has a long way to go. Its core customer is under enormous pressure, and its store locations are at the forefront of the new Wal-Mart onslaught.
“Hannaford has a totally different demographic and continues to do well, while Sweetbay is struggling because of its legacy from Kash n’ Karry of store location issues, plus the competitive strength of Publix in Florida.”