Royal Ahold's Q3 earnings grew 15% to €257M as sales rose 2.5% to €6.86B; CEO says company has gained market share in the U.S., Netherlands with its strategy of relatively low prices, decent quality
AMSTERDAM, The Netherlands
November 17, 2011
– Royal Ahold NV, the Dutch owner of U.S. supermarket chains Giant and Stop & Shop, reported a 5 percent rise in operating profit for the third quarter, as growth in the U.S. offset a decline in the Netherlands.
Overall operating profit rose to euro300 million ($405 million), and sales were up 2.5 percent to euro6.86 billion. Net profit was up 15 percent to euro257 million ($346 million), but strongly affected by one-time items.
Margins were about unchanged overall, though the company's performance differed sharply in the U.S. and the Netherlands.
Chief Executive Dick Boer said the company won market share in both markets. In the U.S., Ahold pursues a strategy of offering relatively low prices and relatively decent quality, which it sums up as "value for money."
"Customers remain cautious in their spending and focus on value in an inflationary environment," he said in a statement Thursday.
U.S. sales rose 8.5 percent to $5.8 billion, and operating margins improved to 4.1 percent of sales from 3.7 percent as the company was more than able to pass on price increases to customers. Operating profit rose $41 million to $237 million.
In the Netherlands, where Ahold operates the dominant Albert Heijn chain, the company trimmed prices and sacrificed margins in order to add to its lead as the country's largest retailer. Sales rose 4.5 percent to euro2.3 billion, but operating margins fell to 6.4 percent from 7.1 percent and operating profit actually declined by euro7 million to euro149 million.
Albert Heijn offers top-quality produce at above-average prices.
SNS Securities analyst Richard Withagen said in a note that Ahold's performance was better than expected, especially in the U.S., but he repeated a Hold recommendation on the shares.
The net profit figure was hit by a Nov. 4 New York Supreme Court ruling that Ahold disclosed in a footnote. Ahold said as a result of the ruling, it had taken a charge of euro94 million to resolve a lease dispute with a former subsidiary that will impact earnings through 2031. Ahold said it would appeal the ruling, though it was not immediately clear what higher court it could appeal to.
Ahold offset the charge with a tax windfall: it released a euro109 million provision it has been holding to resolve a tax issue it says dates from before 2004. The company did not say why it chose to book the gain this quarter, though it made the company's bottom line appear more or less in line with its operating results, rather than showing a large loss.
Shares were up 1.2 percent to euro9.53 in volatile early trading in Amsterdam.
© 2017 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.