Ahold's VIP Pricing Program On Track

ELLIOT ZWIEBACH

AMSTERDAM — Ahold's Value Improvement Program at Stop & Shop and Giant-Landover is “very much on track,” with reduced pricing and assortments on about 25% of store categories through the end of the second quarter, Larry Benjamin, chief operating officer for the company's U.S. retail operations, said last week.

With the addition of cereal, pet foods and water/juice during the quarter — and the inclusion of the cookies/cracker category during August — Ahold expects to have implemented VIP on 50% of store inventory by year-end, he added.

Benjamin made his remarks during a conference call to discuss Ahold's financial results for the second quarter and 28 weeks ended July 15.

The company also said last week it has decided to delist from the New York Stock Exchange, effective later this month, though its American Depositary Receipts (ADRs) will continue to be traded on the over-the-counter market in the United States.

Ahold said the decision is part of its strategy “to improve cost-effectiveness by reducing complexity without detracting from the integrity of corporate governance and control processes.”

“The benefits of maintaining a U.S. registration and an NYSE listing have declined over time,” the company added, with the majority of Ahold shares held by U.S.-based companies acquired through Euronext Amsterdam and the average daily trading volume in the U.S. less than 5% of the worldwide total over the last 12 months.

A withdrawal will terminate its reporting obligations under the U.S. Securities Exchange Act of 1934, “but we will continue to provide necessary information to ensure we meet conventional reporting standards,” John Rishton, executive vice president and chief financial officer — who is also Ahold's acting president and chief executive officer — said here last week during the conference call.

Following the sale of U.S. Foodservice and a Polish operation, Ahold's corporate net income rose 917.4% to $3 billion for the quarter, while sales declined 2% to $9 billion. For the half, net income climbed 431% to $3.4 billion, while sales rose 1.6% to $20.8 billion.

In the U.S., sales for the quarter rose 4.1% to $5 billion, encompassing $4 billion at Stop & Shop/Giant-Landover (a 1.9% gain) and $1 billion at Giant-Carlisle (up 13.7%) — aided by the acquisition in last year's fourth quarter of 13 Clemens Markets stores.

Operating income fell 20.2% to $217 million for the quarter, including a drop of 27.8% at Stop & Shop/Giant-Landover; for the half, operating income fell 18% to $502 million. The company said operating income was impacted by restructuring charges of $26 million, mainly resulting from the closure of 10 Stop & Shop stores in southern New Jersey and New York.

Besides lowering prices, the VIP effort also involves cutting back on assortments in each category “in the range of 20%,” Benjamin said.

“As we continue to move forward in a disciplined way, we've seen encouraging developments in terms of consumer price perceptions and price-reduction awareness, as well as basket sizes and number of trips,” he said.