SALISBURY, N.C. — Delhaize officials last week said they intended to expand brand repositioning to as many as 800 Food Lion stores by the end of 2012.
Officials cited positive results at 200 repositioned stores in pilot markets of Raleigh, N.C., and Chattanooga, Tenn., saying those stores showed comparable sales gains in excess of the rest of the chain and “high single-digit” increases in traffic and volume. Those stores earlier this year adopted a new positioning emphasizing selection, service and lower prices.
Ron Hodge, executive vice president of Delhaize Group, said the rebranded stores were also experiencing better results in sales mix, indicating the changes were drawing a more demographically attractive customer base than they had previously.
“Part of the strategy is around delivering better products experienced by our customers, and we're seeing a strong reaction to that,” Hodge said in a conference call discussing Delhaize's third-quarter financial results. “We're also seeing strong consumer research information. That supports the numbers and is a leading indicator for us in terms of what our expectations are for next year. There are a lot of things that are positive about Raleigh and Chattanooga that leads us into going forward with the plan.”
Officials said they would announce shortly which elements of the new branding effort they will replicate and in which markets. They said they hoped to introduce the changes to between 700 and 800 stores by year-end 2012, including the pilot markets.
The announcement came as Delhaize said U.S. sales increased by 3.5% and comparable-store sales increased 1.9% during the third quarter — but that continued economic pressures, particularly in the Southeast, caused sales to deteriorate from the second quarter. U.S. operating margins were up slightly to 5.2% of $4.9 billion in sales, while operating profits climbed by 3.7% to $252 million. For the year to date, U.S. sales increased 2.6% to $14.5 billion while operating profits decreased 4.1% to $673 million.
The deteriorating economic conditions made passing along inflation challenging, Hodge said.
“We've attempted to pass along as much of the cost inflation as we could, but we simply are not able to do that in all markets,” he said. “We tried to lead the market up in some of our stronger markets but we were more successful in the Northeast than in the Southeast.”
Pierre-Oliver Beckers, chief executive officer of Delhaize, said the company was pleased with the performance of its Bottom Dollar discount stores in the Philadelphia region, and he reiterated plans to expand the concept to the Pittsburgh area beginning early next year.