- Underlying operating income rises 15% to 449 million euros
- Analyst says margin improved more than market consensus
Royal Ahold NV, the Dutch grocery chain that’s merging with Delhaize Group, reported first-quarter profit that topped analysts’ predictions as cost reductions improved profitability in the U.S. and the Netherlands.
Operating income rose 15 percent to 449 million euros ($499 million) on an adjusted basis, the Zaandam, Netherlands-based owner of the Stop & Shop chain said in a statement Wednesday. Analysts expected 434 million euros on average. The stock rose as much as 2.6 percent.
Ahold has forecast 350 million euros in cost savings this year, which will help offset reduced prices and increased investments in higher-quality produce selection in the U.S. as the company tackles increased competition from chains such as Wal-Mart Stores Inc. Ahold’s underlying margin widened to 3.8 percent from 3.5 percent.
“Everybody had a stable margin or slightly higher margin in their models, but not the increase we saw in the first quarter,” Patrick Roquas, an analyst for Rabobank, said by phone.
By combining with Delhaize, Ahold will have 6,500 stores around the world and annual sales exceeding 54 billion euros, with about three-quarters coming from the U.S. Regulators in that country are forcing Ahold to sell stores in some areas where overlap between its Stop & Shop and Giant stores and Delhaize’s Food Lion and Hannaford chains is too big.
“We’re in close contact with several buyers on the identified remedy stores, and we continue to work on and to be on track on the completion of our deal mid-2016,” Chief Executive Officer Dick Boer said on a call with reporters.