Ahold-Delhaize's U.S. stores pressured by Wal-Mart price fight

Thu Nov 17, 2016 11:54am EST
 
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By Toby Sterling

AMSTERDAM (Reuters) - Wal-Mart's (WMT.N: Quote) determination to remain the cheapest U.S. food retailer in the face of competition from German discount stores has pressured Ahold-Delhaize's (AD.AS: Quote) business in the U.S., the company's CEO said in an interview on Thursday.

Ahold Delhaize, the Dutch-Belgian retailer that runs U.S. supermarket chains Stop & Shop, Giant, Hannaford and Food Lion, among others, earlier reported a 4.3 percent rise in third-quarter underlying operating income, to 513 million euros ($549 million) but missed analyst expectations due to its U.S. performance.

CEO Dick Boer said in an interview that the stores most feeling the pinch were its Food Lion shops, of which there are 1,100 situated in Southern U.S. states.

“During the second and third quarter, there was aggressive pricing from Wal-Mart, it's well known in the market, and of course we had to follow to keep our competitive position," he said.

For several years, Food Lion has been cutting prices, emphasizing fresh produce and remodeling stores to make them easier for customers to navigate and find on-sale items.

Boer noted that despite price deflation of nearly 1.5 percent in the areas where Food Lion, the core of Delhaize's U.S. business, competes, the chain had grown sales by 1.3 percent in the past recent quarter, which he said was evidence of its resilience. The division's growth on a like for like basis however was down from 1.6 percent in the same period a year ago, and operating margins fell to 3.5 percent from 3.8 percent.

Boer said Ahold Delhaize is keenly aware of the ongoing U.S. expansion of German retailer Aldi, and plans by another German discount chain, Lidl, to open stores on the U.S. East Coast.

"For sure, every competitor coming into a market is, for us, and for everyone I think, a signal to be more alert than before,” he said.   Continued...

 
Dick Boer, chief executive of Dutch-based supermarkets operator Ahold, speaks during a joint news conference with Frans Muller (not pictured), chief executive of Belgian supermarket chain Delhaize, in Brussels, Belgium June 24, 2015. REUTERS/Eric Vidal