Ahold Sees Ukrop's Improving

MARK HAMSTRA

AMSTERDAM — Ahold here last week said it expects profitability at the former Ukrop's stores it acquired to improve during the second half of the year as transition costs decrease and merchandising changes gain traction.

The Richmond, Va.-area stores, which have all been converted to the Martin's banner, had a loss of $20 million in the recently ended second quarter, about half of which was attributable to one-time and conversion-related costs. Sales at the division were $120 million in the quarter.

“I expect that in the balance of the year, the conversion costs will be far, far smaller than that going forward,” said John Rishton, Ahold's chief executive officer, in a conference call discussing results for the period. “I think we'll have a number of other transition costs, but they'll be relatively minor in the next couple of quarters.”

Ahold's Giant of Carlisle, Pa., division acquired the 25-store Ukrop's chain during the first quarter and has since expanded the store operating hours to include Sundays and added beer and wine to the stores' offerings, among other merchandising and operating initiatives.

“There will inevitably be things that we need to tweak and change,” Rishton added, noting the chain was posting losses and negative comparable-store sales before it was acquired. “We're confident based on our repositioning activities across the U.S. that we can [regain lost traffic] — it just will take a little time.”

The one-time losses during the quarter were basically offset by one-time gains, however, and the U.S. division — which also includes the Stop & Shop and Giant of Landover, Md., banners — posted a 5.6% increase in operating income, to $266 million. Year-to-date, operating income in the U.S. fell 0.9%, to $560 million.

As previously reported, U.S. identical-store sales excluding gas rose 0.5%. Total sales in the U.S. were up 5.5% for the quarter, to $5.5 billion. Year-to-date sales rose 4.8%, to $12.6 billion.

Ahold overall posted a 3.1% gain in net income for the quarter, to about $256.4 million (U.S.). Sales were up 10.8%, to about $9 billion, at current exchange rates (up 4.4% at constant rates).

Through the first half, net income rose 24%, to $604.2 million, on a 5.2% gain in sales, to $20.1 billion (up 3.9% at constant exchange rates).