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Ahold Earnings Miss Estimates as Volumes Stay Under Pressure

Customers Shop Inside a Royal Ahold NV Stop & Shop Supermarket
Customers shop inside a Royal Ahold NV Stop & Shop supermarket in New York. The stock fell 3.6 percent to 12.69 euros in Amsterdam trading after the company said U.S. identical sales excluding fuel dropped 2 percent. Photographer: Daniel Acker/Bloomberg

May 28 (Bloomberg) -- Royal Ahold NV, the owner of Stop & Shop stores in the U.S., posted first-quarter underlying operating income that fell more than analysts estimated, due to low inflation and continued market pressure.

Underlying operational income fell 4.1 percent at constant exchange rates to 392 million euros ($534 million) from a restated 418 million euros a year earlier, the Zaandam, Netherlands-based retailer said in a statement today. The median estimate of 17 analysts surveyed by Bloomberg was 399 million euros.

“First-quarter sales trends were similar to the previous quarter with a flat year-on-year performance, impacted by low inflation and volumes that remained under pressure in all our markets,” Chief Executive Officer Dick Boer said in the statement.

To maintain growth, the owner of the Dutch Albert Heijn chain is putting more focus on its online businesses as consumers around the world seek out value and ease of purchasing. The retailer forecast “similar trading conditions” in the current quarter and slightly lower U.S. margins than in the preceding period as it partly absorbs commodity-price increases.

Margin Pressure

The stock declined as much as 3.9 percent and slid 3.6 percent to 13.14 euros at 9:21 a.m. in Amsterdam, giving the company a market value of 12.9 billion euros.

“The second-quarter outlook points to further margin pressure in the U.S. in comparison to the first quarter,” Robert Jan Vos, an analyst at ABN Amro, said by phone. “On the whole, the results were slightly negative.”

Online sales increased 29 percent to 362 million euros in the quarter at constant rates of exchange, while total sales decreased to 9.82 billion euros from 10.1 billion euros a year earlier and rose 0.3 percent at constant exchange rates. In the U.S., Ahold added 47 pick-up points, bringing its total to 167, Boer said on a conference call with reporters. The company has a target to expand to 200 pick-up points this year.

As part of its online strategy in the Netherlands, the retailer extended its delivery services to drug store brand Etos in the first quarter.

Ahold’s underlying operating margin in the U.S. dropped to 3.9 percent in the first quarter from 4.1 percent a year earlier, while the company’s Dutch margin narrowed to 5.0 percent from 5.3 percent.

The settlement of the Waterbury Class Action suit, relating to former subsidiary U.S. Foodservice, negatively impacted first-quarter earnings by 215 million euros. The U.S. District Court for the District of Connecticut still needs to approve the settlement, which is expected to take place at the end of 2014 or start of 2015.

To contact the reporter on this story: Elco van Groningen in Amsterdam at

To contact the editors responsible for this story: Simon Thiel at Kim McLaughlin, Robert Valpuesta

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