Delhaize Group Earnings Call INSIGHTS: Comparable Sales Growth, Hannaford Sales

On Wednesday, Delhaize Group SA ADR (NYSE:DEG) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Comparable Sales Growth

Sabine Kern – Kepler: I’ve got two questions on the U.S. mainly. The first one, are you disappointed by the fact that your comparable sales growth is the same for Phase One and Phase 2 given really the timing difference? I mean, I would have expected Phase 2 store to show higher comparable sales growth than Phase One store. So, I would like to get your view on this point. The second question is do you believe that in the U.S., you reached the lowest point in terms of EBIT margin in Q2?

Pierre-Olivier Beckers – President and CEO: I will directly let Ron answer.

Ronald C. Hodge – EVP and CEO, Delhaize America: No. Just the opposite, I’m not disappointed comparing Phase 2 to Phase One. I’m highly encouraged. Number one, if we look at similar timeframes of Phase 2 versus Phase One, we’re right in line and actually a little bit better on items and customer account at that point in time. I think the most encouraging part of our announcement is that Phase One continues to grow after it cycled its grand opening date of a year ago in May. So, on one hand we have Phase 2 performing at same type levels and customer acceptance as Phase One did at that stage, and we have Phase One continue to attract new customers, so very encouraged about that. In response to the second question, have we reached our lowest point, I am not sure. We are focusing on our brand strategy; we are not done yet with our investment and pricing at Hannaford or Food Lion, but we have – since our – the end of Q2 have kicked off Phase 3 and have several phases left to go in Food Lion. Even though we’ve got 700 stores that have been converted now with Phase 3, we still have more to go, and we’re very, very encouraged by the results.

Hannaford Sales

Robert Jan Vos – ABN Amro: I have two questions as well. What can you say about Hannaford’s performance in the second quarter? For example, how have store openings by competition impacted Hannaford? And my second question is, you said that remodelings held back Belgium sales growth and also market share in the second quarter. What are your plans for remodelings in the second half in Belgium?

Pierre-Olivier Beckers – President and CEO: Ron?

Ronald C. Hodge – EVP and CEO, Delhaize America: I’ll take the first one about Hannaford sales. We had had competitive openings in two of our three major markets Albany, New York and Manchester, New Hampshire, two market basket stores in Manchester, two ShopRite stores in Albany. All four of these stores are very large, high volume units. For instance any one of these stores would equal having 10 all these open against this. So there is a significant sales impact when they come into these two marketplaces. I think we are dealing with it reasonably well. In fact in Q2 our market share has actually increased across the Hannaford territory. So I’d like to see the overall sales performing at a better level but these things take a little bit of time and responding to price competitors in major marketplaces is a long-term event horizon for us and we are focused on building our sales back in those markets.

Stefan Descheemaeker – EVP and CEO, Delhaize Europe: Yes. Robert, back to your questions on the number of remodelings for the second half, technically speaking there will be less what we call hard remodeling in the second part of the year. So with obviously less closure as such we will still have large remodeling of technical work versus its uplift which doesn’t include a closure. So that’s at least a time-wise, it obviously might be a positive. But let’s not forget as Pierre-Olivier said, it’s a gradual process where we want to enhance our service and so in the coming years we will have more remodelings than in the past which is exactly the right thing to do.