Delhaize Group fell the most in more than a year after the Belgian retailer said the head of its U.S. business resigned after missing out on becoming chief executive officer.
Frans Muller, the former head of Metro AG’s Cash & Carry unit, will become CEO of Delhaize Nov. 8, and Roland Smith is stepping down as head of the company’s American unit, Brussels-based Delhaize said today in a statement.
The departure of Smith, who was a possible CEO candidate, is a “big disappointment,” Andrew Gwynn, an analyst at Exane BNP Paribas, said in e-mailed comments today. Muller’s “critics would accuse him of being ‘asleep at the wheel’ when he ran Cash & Carry.”
Delhaize made more than 64 percent of its 2012 revenue in the U.S., where it runs five chains including Food Lion and has more than 1,500 stores. Smith resigned because he was upset he didn’t get the top job, and he left on good terms, according to Steven Vandenbroeke, a spokesman for Delhaize. The retailer’s U.S. operations will be overseen by the CEO for the “foreseeable future,” he also said.
Muller, 52, was a management board member at Dusseldorf, Germany-based Metro from 2006 until early 2013, and ran the Cash & Carry wholesale unit starting in 2008. He was replaced at Metro, Germany’s largest retailer, in March when group CEO Olaf Koch took over responsibility of the business. Cash & Carry is the source of almost half of Metro’s revenue, and its earnings before interest, taxes, depreciation and amortization dropped every year between 2008 and 2012 except 2010.
Delhaize dropped 7.5 percent to 45.995 euros in Brussels today, the biggest decline since May 2012.
“Cash & Carry used to be the core of Metro’s business,” said Daniel Lucht, an analyst at ResearchFarm, a retail and consumer-goods forecaster in London. “For more than two years it’s been really difficult. In Germany, they missed the boat on a couple of things. They were late to offer a delivery service to hotels and restaurants.”
Muller wasn’t fully responsible for the performance as the company had frequent management changes and economic conditions were difficult, Lucht said.
Smith will be available as adviser to the CEO until the end of the year, Delhaize said. Pierre-Olivier Beckers, whom Muller will succeed, will remain on the board of directors in a non-executive role.
Smith helped Delhaize reverse “the declining margin trend in the U.S. with far more aggressive cost-saving actions,” Exane’s Gwynn said.
Delhaize predicted full-year operating profit will drop less than 3.5 percent, excluding currency effects, on Aug. 8, compared with a prior forecast for a 3.6 percent decline. Second-quarter earnings showed that cost savings and better supplier terms outweighed price cuts in the U.S.
Smith’s resignation and Muller’s appointment “are obviously related,” Robert Jan Vos, an analyst at ABN Amro in Amsterdam, said by phone. “People are not extremely excited about the new CEO. There are some questions about his knowledge of the U.S. market.”
Chief Financial Officer Pierre Bouchut was another possible replacement for Beckers, and may also be reconsidering his role, Vos said.
“There are clearly some worries he may come to the same conclusions as Mr. Smith, but that is all speculation,” he said.
JPMorgan Chase & Co. analysts Borja Olcese and Jaime Vazquez downgraded the shares to neutral today amid concern Bouchut may leave, saying the CFO “has been one of the main reasons” for their positive stance on the stock. They cited a “solid track record” and focus on capital discipline and cash generation.