Ahold Earnings Beat Estimates on Revamp in U.S., Netherlands

  • Fourth-quarter operating income rises 39% to $457 million
  • Profit margin widens to 4.3% from 3.7% on cost reductions

Royal Ahold NV, the Dutch grocery chain that’s merging with Delhaize Group, reported fourth-quarter profit that topped analysts’ estimates as profitability in the U.S. and the Netherlands improved because of cost reductions.

Fourth-quarter underlying operating income rose 39 percent to 421 million euros ($457 million), the Zaandam, Netherlands-based owner of the Stop & Shop chain said in a statement Thursday. The average estimate of analysts polled by Bloomberg was 382 million euros. This year’s fourth quarter included one more week than the same quarter a year earlier.

The shares rose 1.3 percent to 21 euros at 9:11 a.m. in Amsterdam. Underlying operating margin widened to 4.3 percent from 3.7 percent in the fourth quarter and the company said it expects profitability to improve further in 2016.

“That clearly shows that the inflection point is reached and that they’re in a positive momentum,” Alan Vandenberghe, analyst for KBC Securities , said by phone.

Cost Savings

Ahold forecasts cost savings of 350 million euros this year, which will help pay for reduced prices and investments in higher-quality assortment and changes to stores in the U.S. as the company tackles increased competition from chains such as Wal-Mart Stores Inc. After the merger with Belgium’s Delhaize, the company will have more than 4 percent of the U.S. grocery market. Globally the combination will have 6,500 stores and annual sales exceeding 54 billion euros.

The company repeated that it is on track to complete the Delhaize merger by mid-year. Key milestones are shareholder meetings on March 14 by both companies and approval by U.S. and Belgian regulators. In Belgium, the company proposed to divest some stores and it expects approval later this month, Ahold said last week.

Separately, Delhaize on Thursday said underlying operating margins in the fourth quarter widened to 4.1 percent from 3.9 percent a year ago. The Belgian retailer raised its dividend by 12.5 percent to 1.80 euros per share.

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