Ahold in New Cost-Cutting Effort

MARK HAMSTRA

AMSTERDAM — Ahold last week said it plans to drive another 350 million euros — about $525 million U.S. — in costs out of its operations during the next three years.

The cost-cutting “will focus on all aspects of the business, including store expenses, supply chain and overhead across the group,” John Rishton, Ahold's chief executive officer, said in a conference call discussing third-quarter results.

He cited specific opportunities in the U.S. supply chain, noting that a program to reduce costs in the Netherlands could provide lessons for the U.S. He also said the company hoped to capitalize on employees' growing awareness of sustainability issues to help find ways to reduce energy use throughout the system.

Rishton reiterated that Ahold doesn't envision making any large acquisitions in the near future, but is seeking to invest in smaller deals, such as low-risk “bolt-on” acquisitions in existing or adjacent markets.

The company is migrating “from the phase where we'd be spending most of our time, energy and efforts on repositioning our businesses to give us a firm foundation, into a phase where we are much more aggressively looking for growth opportunities within existing and within new markets,” he said.

Ahold earlier this month had realigned its U.S. operations into four divisions, which it said would better position the company to capitalize on such growth opportunities.

During the third quarter, which ended Sept. 30, the company said its focus on driving volume through low prices and promotions at its Giant of Carlisle, Pa., banner put pressure on the chain's profitability. Operating income at the chain declined 10%, to $45 million, on a 0.8% sales gain, to $1.1 billion. Year-to-date operating income declined $9 million, to $164 million, on a 1.5% sales gain, to $3.7 billion.

Ahold noted that the competition from Wal-Mart Stores has been especially intense.

Operating income at Stop & Shop/Giant-Landover was up $22 million in the quarter, to $189 million, on a 1.9% gain in sales, to $4 billion. Through three quarters, operating income was up $137 million at Stop & Shop/Giant-Landover, to $631 million, on a 2.9% increase in sales, to $13.4 billion.

Overall, Ahold said net income in the quarter rose 22.1%, to about $354 million (U.S.), on a 4.3% gain in sales, to almost $9 billion. At constant exchange rates, the sales gain was 2.6%.