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Delhaize Q1 Profit Rises On U.S., Belgium Strength; Shares Up

Shares of Delhaize Group (DEG) grew around 8 percent in the morning trade in Brussels after the Belgian food retailer reported higher underlying operating profit and revenues for its first quarter. The company also announced its forecast for fiscal 2013 underlying operating profit, and said it has decided to postpone its Capital Markets Day.

In the first quarter, the company's underlying operating profit was 214 million euros, a 13 percent increase from last year at actual exchange rates and a 13.7 percent increase at identical exchange rates. Underlying operating margin was 3.9 percent, higher than prior year's 3.5 percent.

In the U.S., underlying operating margin grew to 4.2 percent from prior year's 3.7 percent, benefited by positive sales leverage supported by the favorable calendar impact, non-performing store closures, cost reductions and Bottom Dollar Food's significantly improved results. This was partly offset by continued price investments.

In Belgium, underlying operating margin was 5.1 percent, higher than 4.6 percent a year ago, mostly driven by cost control and positive sales leverage. In Southeastern Europe, underlying operating margin, meanwhile, decreased to 1.4 percent from 2 percent last year, mostly driven by price investments.

Underlying earnings before interest, tax, depreciation and amortization or EBITDA, a key earnings metric, was 369 million euros, 6.4 percent increase from last year.

Quarterly revenues were 5.5 billion euros, an increase of 2.1 percent and 1.5 percent at identical and actual exchange rates, respectively. Organic revenue growth, excluding revenues from stores closed in the U.S., was 3.8 percent.

In the U.S., comparable store sales growth was 1.9 percent, fueled by favorable weather conditions and continued good volume trends in the Food Lion repositioned stores and at Hannaford. This was partly offset by deflation which was however at a lower level than the previous quarter.

In Belgium, comparable store sales growth was 2.4 percent as a result of inflation and improved volume trends. In Southeastern Europe, revenues grew 6.8 percent at identical exchange rates due to store openings, while consumer spending is under pressure in the region.

The company said it will disclose first-quarter results on May 8.

Looking ahead for fiscal 2013, Delhaize expects underlying operating profit of about 775 million euros at identical exchange rates, citing its continued focus on strategic priorities. In the year 2012, the company's underlying operating profit was 810 million euros.

In addition, Delhaize said it has decided to postpone its Capital Markets Day, previously scheduled for May 8, until later in the year. This will allow the company to provide a more comprehensive update on its business and long-term strategy.

In Brussels, Delhaize shares are currently trading at 46.21 euros, up 3.53 euros or 8.27 percent.

On the NYSE, the shares closed Friday's trading at $55.65, up 1.55 percent.

by RTTNews Staff Writer

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