Supermarkets operator Delhaize Group (DEG) on Thursday reported a decrease in fourth quarter profit, hurt primarily by lower revenues due to high food deflation in the US. The quarter's revenue decline also reflected price competition in the industry.
For the fourth quarter, net earnings attributable to shareholders decreased 9.6% to EUR 134 million or EUR 1.34 per share from EUR 149 million or EUR 1.46 per share a year ago.
Net profit from continuing operations was EUR 136 million or EUR 1.33 per share compared to EUR 164 million or EUR 1.55 per share in the 2008-year period. In the prior-year quarter, the company had a loss of EUR 9 million from discontinued operations.
The company's profit before taxation and discontinued operations was EUR 172 million as compared EUR 234 million in the previous-year period.
The Brussels, Belgium-based group with market capitalization of over EUR 7.78 billion, has activities in seven countries across three continents. Its principal activity is operation of food supermarkets in North America, Europe and Southeast Asia. Delhaize Group's sales network also includes other store formats, such as proximity stores and specialty stores. In addition to food retailing, it is into food wholesaling to stores in its sales network and in retailing of non-food products, such as pet products.
Revenues for the quarter decreased 10.1% to EUR 4.87 billion from EUR 5.42 billion in the comparable period prior year. At identical exchange rates, revenues dropped 3.3% to EUR 5.23 billion from EUR 5.41 billion in the previous year. Quarterly organic revenues were EUR 5.23 billion, up 1.5% from EUR 5.16 billion a year earlier.
In the sequential third quarter, the company posted attributable net earnings of EUR 128 million or EUR 1.27 per share on revenues of EUR 4.88 billion.
During the fourth quarter of fiscal 2009, comparable store sales declined 2.8% in the US, while it grew 2.6% in Belgium with better volume trends compared to the prior year in a highly deflationary US environment.
Segment-wise, revenues from the US were EUR 3.17 billion versus EUR 3.82 billion last year. In US dollars, US revenues dropped 8.5% to $4.72 billion from $5.15 billion in the fourth quarter of fiscal 2008. Excluding the 53rd week in 2008, revenues were below the same quarter last year by 1.2% in local currency. Comparable store sales were down 2.8% mainly due to retail deflation.
"In the U.S., our operating companies experienced a marked improvement of the volume trends as a result of targeted price investments and adapted assortments, in part financed by better inventory management results and a more favorable product mix," said Pierre-Olivier Beckers, president and chief executive officer.
The decline in sales was overpowered by by an extra week included in the fourth quarter of 2008 in the US, which added an extra EUR 258 million to the year-earlier sales figure. Delhaize also noted that the US dollar had weakened 11% against the euro since earlier year.
At Belgium, quarterly revenues grew 6.3% to EUR 1.23 billion from EUR 1.16 billion in the corresponding period previous year. Comparable store sales were up 2.6%. The company noted that holiday sales were very strong and benefited from further price investments, successful direct mailing campaigns and great execution throughout the supply chain.
Greece segment generated revenues of EUR 408 million, up 7.8% from EUR 379 million a year earlier, and revenues from rest of the world increased 11.5% to EUR 64 million from EUR 56 million in the same quarter last year.
Quarterly gross margin decreased by 16 basis points at actual exchange rates to 25.7% from 25.9% in the previous year and remained stable at identical exchange rates.
During the three-month period, selling, general and administrative costs were EUR 1.01 billion versus EUR 1.10 billion in the same period last year, and cost of sales dropped to EUR 3.62 billion from EUR 4.02 billion in the previous year. Other operating expenses rose to EUR 46 million from EUR 39 million a year ago.
For fiscal 2009, the company's attributable net earnings increased to EUR 514 million or EUR 5.08 per share from EUR 467 million or EUR 4.59 per share in the 2008-year period. Net income from continuing operations was EUR 512 million or EUR 5.00 per share versus EUR 485 million or EUR 4.65 per share in the last-year period.
Full year revenues rose slightly to EUR 19.94 billion from EUR 19.02 billion in fiscal 2008. For the year, comparable store sales fell 0.4% in the US, but rose 2.7% in Belgium.
The food retailer ended 2009 with a sales network of 2,732 stores, representing an increase of 59 stores compared to the prior-year period.
Beckers added, "The new organizational structure in the U.S., announced on January 14, 2010, has been in place since early February. All of our operating companies have started to fine-tune their pricing strategies to achieve local value leadership, and we are gearing up for many other projects, including achieving EUR 300 million of annual operating cost savings by 2012. We are ready for the challenges of 2010."
Delhaize's previously announced new organizational structure in the US includes restructuring of US operations into an organization operating unique and strong banners supported by a common shared services structure, closing of 15 under performing Food Lion stores and one under performing Bloom store.
Looking ahead to fiscal 2010, the company estimates operating profit growth for the year to be in a range of 7% and 10% at identical exchange rates.
For the year 2010, the group expects to open 120 to 130 new stores, totaling to about 2,834 to 2,844 stores, and also sees to step up the openings of Bottom Dollar Food stores in the US, and Greek, Romanian and Indonesian operations. Delhaize anticipates capital expenditure to be about EUR 800 million at identical exchange rates.
Further, the board said it will make a proposal in the ordinary general meeting on May 27, 2010 to raise net dividend by 8.1% to EUR 1.2 per share. The company noted that the record date is June 2, 2010 and the payment date is June 3, 2010.
In Wednesday's regular trading session, DEG closed trading at $81.99 per share on the New York Stock Exchange. In the past 52-week period, the stock has been trading in a range of $56.27 to $81.99.
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