Ahold Delhaize Profit Misses Estimates on U.S. Deflation

  • Price pressure erodes sales at Food Lion supermarket chain
  • Shares decline as much as 3.8% on competitive outlook

Ahold Delhaize Sees Challenging U.S. Trading Environment

Royal Ahold Delhaize NV reported earnings below analysts’ estimates as deflation hurt the Food Lion U.S. grocery stores in the company’s first results since it was created in a Dutch-Belgian merger.

Underlying operating income rose 4.3 percent to 513 million euros ($549 million) in the third quarter, the Zaandam, Netherlands-based owner of the U.S. Stop & Shop chain said Thursday. Analysts expected 520 million euros. The shares fell as much as 3.8 percent in Amsterdam, the steepest intraday decline in four months.

The U.S. is Ahold Delhaize’s slowest-growing region even after the Dutch and Belgian retailers merged this year to confront heightened competition in that country, the source of about two-thirds of their sales. Food Lion has been hardest hit by deflation as Wal-Mart Stores Inc. has been slashing prices in its key markets of North and South Carolina. Chief Executive Officer Dick Boer said deflation won’t let up in the U.S. in the fourth quarter.

“The outlook is not very engaging,” wrote Antoine Parison, an analyst at Bryan Garnier & Co. “The U.S. trading environment remains challenging.”

The stock fell 2.6 percent to 20.11 euros as of 10:12 a.m. local time. Shares of U.S. supermarket operators dropped Wednesday after producer-price index data signaled that food deflation will continue to squeeze grocers’ profit.

At constant exchange rates, third-quarter sales growth in the U.S. slowed to 2.4 percent at Ahold and 1.1 percent at Delhaize.

The company forecast full-year profitability slightly ahead of last year’s, when the underlying operating margin was 3.5 percent. That margin widened to 3.6 percent from 3.4 percent in the first nine months of the year.

Wal-Mart is scheduled to report quarterly results Thursday.

    Before it's here, it's on the Bloomberg Terminal.