The Brussels, Belgium-headquartered Delhaize Group announced on November 6 that it has signed an agreement to sell its 66 Bottom Dollar Food stores in the United States to discount grocery retailer ALDI Inc. The $15 million deal, which includes the assumption of associated lease liabilities, encompasses 66 Pennsylvania outlets in the greater Philadelphia and Pittsburgh markets. The transaction is expected to result in asset impairment and other charges of approximately $180 million for Delhaize.
All stores are anticipated to remain open as Bottom Dollar Food outlets until year-end. After that time, Bottom Dollar Food will close the shops and retire the banner’s operations. The transaction is subject to customary closing conditions and is expected to be completed by the end of the first quarter 2015.
Third Quarter Results
Meanwhile, the company has reported third quarter 2014 results, highlighted as follows:
- Revenue growth of 3.3% at identical exchange rates (3.3% organic growth)
- Comparable store sales growth of 5.3% in the US and -5.0% in Belgium
- Group underlying operating profit of €192 million, underlying operating margin of 3.5% (4.2% in the US, 1.4% in Belgium)
- Free cash flow generation of €118 million (€426 million for the first nine months of 2014)
Frans Muller, president and chief executive officer of the Delhaize Group, commented: “While our overall performance in the third quarter met our expectations, results were decidedly mixed among our key regions,” said Muller. “In the United States, comparable store sales growth was very strong at 5.3%, resulting from both continued good momentum at Food Lion and favorable, albeit temporary, competitive dynamics at Hannaford. These positive volume trends resulted in a 10% increase in our US underlying operating profit.”
“In August,” he continued, “we launched the first 31 Food Lion stores deploying our new ‘Easy, Fresh & Affordable’ strategy. Although it is too early to draw conclusions, they are experiencing good initial customer response. We will roll out the next 45 stores next week.”
The company’s performance in Europe, however, was disappointing.
“In Belgium, results were impacted by both weak summer trading and uncertainty caused by the June announcement of the Transformation Plan. While we believe this impact is temporary in nature, disruptions have persisted and conditions have deteriorated in the fourth quarter. We remain determined to make our business more sustainable in the long term, and continue to be in a dialogue with our social partners to realize this,” said the ceo.
He continued: “In Southeastern Europe, we faced weak economic conditions in our markets and deflation in Serbia, both of which have continued in the fourth quarter. We remain focused on our store expansion plans to increase our strong and growing market positions.”
The international food retailer operates in seven countries on three continents. At the end of the third quarter of 2014, its sales network consisted of 3,386 stores. The Group, which employs approximately than 152,500 people, rang up sales of €20.9 billion ($27.8 billion) last year, realizing €179 million ($237 million) in net profit.