Ahold hit by price competition
Road to Recovery ‘bearing fruit’
Global supermarket operator Ahold is promising ‘a year of execution’ in its drive to restore its fortunes, after reporting fourth quarter earnings below expectations.
By next year, The Dutch retail group is aiming for 5 per cent annual sales growth and a return on investment of 14 per cent as part of the Road to Recovery programme initiated after the accounting scandal that swept the business two years ago.
Chief executive officer Anders Moberg said: “2004 was our year of transition, 2005 is turning into a year of execution, a year in which we are delivering on our promise and concentrating on implementing our new way of working based on the sold structure created in 2004.”
In the fourth quarter, net income increased to €96m, a big increase on the €12m reported a year ago but slightly below analysts forecasts of €100m. Operating profit was €207m and Ahold reported a full-year loss of €443m, mainly due to charges related to the group’s disposals in Latin America.
Fierce price competition on its home territory saw margins at the Albert Heijn supermarket chain fall to 4.8 per cent from 6 per cent a year ago. On the US chains, Stop & Shop/Giant-Landover saw margins fall to 5.18 per cent from 7 per cent, while at Giant-Carlisle/Tops it was up to 1.7 per cent from 0.08 per cent.
Moberg said: “During 2004 and especially in Q4 2004, we have made good progress. As we anticipated, this progress did not result in performance improvement in 2004, but we will in due course reap the benefits of our efforts.
“We are continuing the process of building a strong and healthy financial foundation. We are generating the resources to be able to invest in the growth of our stores, distribution centers, systems and people to achieve our strategy for our customers, associates and shareholders.
We are moving closer to our customers, in order to better differentiate our offering and by investing in our pricing.
“We believe customer focus and operational excellence are crucial if we are to achieve long-term success in an increasingly competitive sector.”
