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UPDATE 2-Ahold Q2 sales rise but miss forecasts

Published 07/28/2009, 04:50 AM
Updated 07/28/2009, 04:56 AM
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* Sales up 11.5 percent but well below expectations

* Dutch grocer sees increased focus on price, promotions

* Shares fall to 4-month low

(Adds analyst comment, shares, detail)

By Reed Stevenson

AMSTERDAM, July 28 (Reuters) - Dutch supermarket group Ahold increased quarterly sales but missed forecasts as the economic slump drove shoppers to cut their spending on food.

Shares in the firm, which had gained market share thanks to a restructuring it adopted well ahead of rivals, fell to a four-month low after it reported on Tuesday second quarter sales of 6.43 billion euros.

The figure was well below the average of 6.56 billion euros expected in a Reuters poll of 13 analysts as growth in its U.S. business lagged.

The Amsterdam-based food group operates U.S. Stop & Shop and Giant food sellers and the Albert Heijn franchise in the Netherlands.

Although the sales figure reflected a healthy 11.5 percent rise from 5.77 billion euros a year earlier in the current sluggish economic climate, the result fell below the lowest analyst forecast for 6.48 billion euros.

"Ahold's trading update was much weaker than expected," said SNS Securities analyst Richard Withagen. "The company has been able to keep competition at bay for a long time, but that appears to be changing with today's set of numbers."

Shares in Ahold fell 4.3 percent to 8.03 euros by 0836 GMT, compared with a flat DJ Stoxx European retail index.

ROBUST GROWTH

Ahold adopted restructuring measures well ahead of its competitors, such as Delhaize and Kroger, revamping stores and operations to enable it to post robust sales even as economic growth stalled.

But consumers, who are opting to buy groceries instead of eating out in a weak economic environment, have become more price-conscious and more careful with their spending, Ahold said.

"Inflation slowed considerably and we continued to see changing customer and competitor behaviour, with an increased focus on price and promotions," the company said in a statement.

That was especially evident in slower sales growth at Ahold's U.S. businesses.

Sales at Ahold's U.S. operation Stop & Shop and Giant-Landover rose 2.8 percent to $4.1 billion. Its other U.S. supermarket franchise Giant-Carlisle reported a sales increase of 0.4 percent to $1.1 billion.

Petercam analyst Fernand de Boer noted that Ahold's U.S' performance was still relatively strong, and that sales in its home market reflected Ahold's continued dominance over Dutch competitors.

At Ahold's Dutch chain Albert Heijn, sales rose 7.8 percent to 2.2 billion euros.

Ahold's overall growth rate also exceeded that of larger European rivals, including Carrefour -- which earlier this month posted a 1.2 percent fall in second quarter sales -- and Tesco, where sales in the UK rose at their fastest rate for two years to post growth of 9.7 percent.

(Reporting by Reed Stevenson; editing by Simon Jessop, John Stonestreet)

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