FOOD LION LEADS SALES GAINS AT DELHAIZE

JON SPRINGER

BRUSSELS - Rapid progress at Food Lion and a price-driven sales rebound at Hannaford Bros. lifted sales at Delhaize Group's U.S. stores by 5.7% to $4.4 billion in the fiscal second quarter ending June 30, the retailer here said last week.

Comparable-store sales in the U.S. increased by 4.1%; excluding the impact of Easter sales occurring in the second quarter this year but in the first quarter in 2005, U.S. comps improved by 3.4% - the group's best quarterly performance in five years, the company said. The strong results prompted Delhaize to raise its estimated U.S. comps for the fiscal year to between 2.5% and 3%, up from previously stated targets of 1.5%-2%.

"I think we are playing our game much more consistently and much better than we have in the past," Rick Anicetti, chief executive officer at Food Lion, told analysts in a conference call. That division, Delhaize's largest, benefited during the quarter from the closure of Winn-Dixie stores affecting nearly 25% of its store base, and also from price, promotion and marketing activities that have narrowed the price gap with Wal-Mart, and internal programs reducing shrink and enhancing its supply chain, Anicetti said.

Food Lion launched 19 remodeled Food Lion stores and three converted Bloom stores during the quarter as part of its ongoing market renewal program in Washington, D.C. The company expects to complete conversions of 25 Bloom stores, 11 Bottom Dollar discount stores and seven Food Lions in the second half. It will add 15 new Bloom stores early next year.

"What's very different about Food Lion today is that it's just not the one trick of price alone," Anicetti added. "I think what consumers are seeing is a very different shopping experience and a much more consistent shopping experience from one week to the next. And I think that has had a tremendous difference and is a little bit more difficult [for competitors] to counteract."

In New England, Hannaford rebounded from a soft first quarter behind shelf-price investments, particularly in Massachusetts where Hannaford is newly arrived, and 14 new stores in the first half.

"We are accelerating our growth at Hannaford," Pierre-Olivier Beckers, Delhaize's CEO, told analysts. "I think that is a good reason to want to make sure we pursue our brand image and marketing in an aggressive way."

In Florida, Kash n' Karry stores converted to the Sweetbay banner are showing strong sales gains, while those not yet converted are struggling, Delhaize said. The company converted 21 stores in the second quarter and plans to complete another 22 by the end of the year. The cost of these transformations, along with higher energy costs, drove expenses up by 6.9% during the quarter.

Overall, Delhaize said its second-quarter profit rose 23% to about $121 million, with sales up 6.8% to about $6.3 billion. In the U.S., earnings of $85.4 million increased by 22%.