Delhaize Gains as Profit Tops Estimates Amid U.S. Sales RecoveryJohn Martens
Delhaize Group SA, the owner of the Food Lion supermarkets, rose in Brussels trading after reporting earnings that beat analyst estimates as sales at U.S. stores open at least a year climbed at the fastest pace in 1 1/2 years.
Delhaize gained as much as 8.9 percent to 46.45 euros, the highest intraday value since January 2012, and traded 3.04 euros higher at 45.72 euros by 9:12 a.m. local time. The shares have advanced 51 percent so far this year, the best performance in the Stoxx 600 Retail Index.
First-quarter operating profit before one-time items rose 13 percent to 214 million euros ($279 million), the Brussels-based company said today in a statement. Analysts projected a decline to 175 million euros, according to the average of 17 estimates published on the company’s website. Comparable sales in the U.S. advanced 1.9 percent, the most in six quarters, and rose 2.4 percent in Belgium, corrected for a calendar impact.
Delhaize said favorable weather and easing retail deflation helped to fuel the sales recovery in the U.S., where a slide in revenue was halted in the fourth quarter following price cuts and a brand overhaul covering 62 percent of the 1,127 Food Lion stores so far. The closure of 34 unprofitable Sweetbay supermarkets in Florida will boost earnings by about 20 million euros this year and losses at Bottom Dollar Food, Delhaize’s discount format in the Philadelphia and Pittsburgh areas, will “progressively disappear”, Chief Financial Officer Pierre Bouchut said on a conference call on Jan. 17.
“The swing from the fourth quarter is too big,” Andrew Gwynn and John Kershaw, analysts at Exane BNP Paribas in London, wrote in a note today. “Either the group has eased back on price investments or the other drags that have seemingly eased were far bigger drags than expected.”
Delhaize forecast operating profit before one-time items will decline to about 775 million euros from 810 million euros a year earlier, assuming stable exchange rates. That compares with analyst projections of 741.5 million euros, the average of 13 estimates compiled by Bloomberg.
A planned investor day on May 8, when Delhaize was also scheduled to report first-quarter earnings, was postponed to give a “more comprehensive” strategy update, according to today’s preliminary statement.