AMSTERDAM — The chief executive officer of Ahold here last week asked analysts to have patience with results from the retailer's last big acquisition — and with their anticipation for its next one.
Ukrop's, the 25-store Richmond, Va., chain folded into Ahold's Giant-Carlisle banner and converted to the Martin's banner earlier this year, will likely be a money loser for another year, said John Rishton during a conference call discussing the retailer's third-quarter results. However, he maintained confidence that Ahold would eventually get the chain turned around, and that opportunities to buy additional chains would arise as the economic environment continues to weaken its competitors.
The addition of Ukrop's stores to Ahold's U.S. fleet provided $114 million in sales and $11 million in losses during the third quarter, Rishton said. As a result, Ahold USA saw its operating income decline by 16.2% in the quarter to $196 million. U.S. sales of $5.3 billion improved by 4.8%, with identical-store sales, excluding gasoline, up by 0.6%.
Rishton said Ahold was “disappointed” with initial results of the converted Ukrop's stores earlier this year, but said sales improved during the third quarter. He asked analysts for patience as the turnaround progressed, stressing that introducing beer and wine sales and opening on Sundays was only part of the plan.
“You are well aware of how challenging it can be to reverse a trend of significant double-digit minus identical sales, losing customers and making losses,” Rishton said. “I and others make it sound easy, but the reality is it is difficult.”
Rishton said a third element of its turnaround for Ukrop's — addressing costs — would be dealt with gradually. “Everyone thinks we can do that overnight and it's all fixed, but it never works that way,” he said.
Although the sales gain in the U.S. was modest on a percentage basis, Rishton emphasized the results were “credible” — considerably stronger than some competitors, and achieved amid a difficult environment for sales.
“You can look at [sales] year-over-year and say it isn't very much. Or you could look at it relative to our competition. I think the fact that we had positive comps in this quarter is a great testament. If the market was more robust, my suspicion is that comps would be significantly higher. The difference between our comps and some of our competitors is significant.”
That weakness has forced some competitors recently to close stores and will ultimately provide opportunities for Ahold to gain more share, Rishton said. He reiterated the retailer's ability and willingness to make acquisitions but said “valuations have to become more realistic” before Ahold will move.
“The weak will get weaker and there will be more opportunities,” he said. “At the moment we're seeing stores being closed. That's my favorite, because I can get another customer, and I don't have to invest anything.”
There are assets for sale, he added, but he said the company was “unprepared to overpay” and expressed confidence that prices would come down.
Through the first nine months of the year, Ahold reported sales of $17.9 billion, an improvement of 4.8%, with identical sales excluding gasoline up by 0.3%.
Worldwide, Ahold said quarterly sales improved by 10.8% to $9.1 billion (U.S.) while net income declined 8.6% to $303 million, below analyst estimates.
