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Colruyt First-Half Profit Misses Estimates on French Loss

Colruyt NV, Belgium’s biggest discount food retailer, reported a steeper-than-estimated drop in fiscal first-half profit as its expansion in France turned unprofitable on price cuts and accelerated store openings.

Net income in the six months through September fell to 158.7 million euros ($211.6 million) from 171.7 million euros a year earlier, the Halle, Belgium-based company said today in a statement. Per-share profit of 1 euro missed the 1.08-euro average of 10 analyst estimates compiled by Bloomberg. Sales rose 7.7 percent to 3.83 billion euros.

Colruyt joined Delhaize Group SA in saying a slump in Belgian consumer confidence and less favorable weather affected sales in the three months through September, while tougher competition made it impossible to pass on rising purchasing costs and wage indexation to customers. The discount food retailer said its forecast for full-year profit close to last year’s 338 million euros “remains a challenge” after both its 57 supermarkets in France and investments in renewable energy lost money in the first half.

“Investments in our price position and an accelerated store expansion on an extremely competitive market led to negative results,” Colruyt said in the statement, in reference to its retail business in France. “Expected initial losses in the Belwind wind farm are in line with the forecasts.”

Margin Shrinks

The retail division’s operating margin narrowed to 7.25 percent in the first half from almost 8.30 percent a year earlier. It also shrank from 7.31 percent in the second half of last year. Payroll expenses rose 8.4 percent and Colruyt’s workforce expanded by 3.1 percent from the end of March to 23,296 employees at the end of September.

Colruyt generated 12.5 million euros of cash not required for reinvestment in the six-month period, a decrease from 59.8 million euros a year earlier, with inventories and trade receivables showing an increase similar to revenue growth.

Capital spending declined 3 percent to 152.6 million euros in the first half, even as Chairman Jef Colruyt said on Sept. 21 it may rise to as much as 330 million euros this year.

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