Food Lion Buoys Hopes for Stop & Shop

Food Lion is pacing U.S. sales gains for Ahold Delhaize, and it could show the way for its new sister brand, Stop & Shop, as it begins its own renewal, officials of the retailer said when reviewing fourth-quarter and fiscal-year financial results.

The financial report reiterated results of a trading statement released earlier this year showing U.S. sales gains of 2.6% to 9.8 billion euros (about $11.1 billion) in the quarter and nonfuel comparable store sales improving by 2.7%. Full results this week indicated that profitability improved with U.S. underlying operating margins improving to 4.3%, or 7.4% higher than last year’s fourth quarter. E-commerce accounted for about $231 million in sales in the quarter and improved by 12.1%

Food Lion, which over recent years has completed a rebranding initiative bringing lower prices and more convenience to about 70% of its stores, is leading Ahold Delhaize’s U.S. momentum, and officials are looking to its success as they begin a similar program at Stop & Shop, its largest U.S. banner.

Officials in a conference call said quarterly comps at Stop & Shop remain “challenged” but that they were excited about the “Reimagined Stop & Shop” program, which debuted late last year in 20 stores around Hartford, Conn. Those stores—which are testing various interpretations of a remodel, including expanded fresh departments and center store aisles and new pricing initiatives—are seeing sales increases of 4% to 6%, CEO Frans Muller said.

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As previously reported, Ahold Delhaize will be investing an incremental 100 million to 150 million euros (about $113 million to $170 million) annually to revamp Stop & Shop’s 400-store fleet.

Muller described the Hartford stores as a testing ground, saying initiatives from those stores would be refined as the initiative expands, similar to the way Food Lion rolled out its “Easy Fresh and Affordable” strategy.

“You test various composites of elements and you will see how markets will react,” Muller said. At Food Lion, “cycle by cycle we learned. And we adjusted, then we learned; and we adjusted, then we learned, then we adjusted. And that's exactly what we have in mind with Stop & Shop.”

The company will make mistakes along the way, he added. In one Hartford store, Stop & Shop removed a full-service deli in favor of self-service, “and customers didn't appreciate this,” he said. “We didn't expect that. So we reversed that one.”