Food Lion sales boost Delhaize earnings, more store closings planned
SALISBURY — The makeover of 703 Food Lion stores, including those in Rowan County, appears to be paying off for parent company Delhaize.
Salisbury-based Food Lion recorded its best quarterly performance since 2006 during the fourth quarter of 2012, Delhaize announced Thursday.
Along with the positive earnings report, Delhaize said it will close eight underperforming Food Lion stores, as well as stores in other Delhaize America chains, to “strengthen the organization’s store portfolio.”
Delhaize stock rose nearly 10 percent on the news, closing at $46.69 per share Thursday.
• Food Lion will close one store in Belmont, four in Virginia and three in South Carolina. After the closings, Food Lion will have 1,119 locations and will continue to operate in 10 states.
• Sweetbay, based in Florida, will close 33 stores and a pharmacy in Florida.
• Bottom Dollar Food, based in Salisbury, will close three stores in the Philadelphia area.
Delhaize, a leading supermarket chain in Belgium that makes about 65 percent of its sales in the United States, last year closed 113 Food Lion stores and pulled out of Florida.
Delhaize on Thursday reported sales were up 2.3 percent or $7.66 billion in the fourth quarter of 2012. That includes a 1.9 percent uptick in the U.S., where Food Lion makes up the lion’s share of Delhaize America, also based in Salisbury.
In response to increasing competition and a shrinking market share, Delhaize in 2011 began overhauling the Food Lion chain, cutting prices, improving fresh produce and rolling out more private labels for price-conscious shoppers.
Delhaize will continue to revamp Food Lion stores in the first quarter of 2013.
Transactions at revamped Food Lion locations increased by 3.5 percent in the fourth quarter of 2012, and the number of items in each grocery cart increased by 1 percent.
Thursday’s earnings report marked a turning point for Delhaize, which had posted four quarters of decline. Price cuts at Hannaford, plus new Bottom Dollar Food stores — sister chains to Food Lion — helped boost sales volume.
“We are pleased to announce that organic revenue growth improved during the fourth quarter, in particular as a result of positive volume growth at Delhaize America,” Pierre-Olivier Beckers, president and CEO of Delhaize Group said in a statement. “Food Lion reported positive volume, transaction and comparable store sales growth for the quarter and recorded its best quarterly performance since 2006.”
The earnings report comes on the heels of a management shake up at Food Lion and Delhaize America.
New Delhaize America CEO Roland Smith recently removed Cathy Green Burns as president of Food Lion, as well as two senior vice presidents based in Salisbury. Fifteen Food Lion and Delhaize America officers lost their jobs last week, including nine based in Salisbury, a 25 percent decrease in top management positions.
Delhaize’s underlying operating profit for 2012 was down 17.5 percent from 2011. The company had expected the decrease.
“We remain determined to accelerate the transformation of our business,” Beckers said. “In 2013, our focus will be on further strengthening our store brands, accelerating revenue growth, maintaining strict cost control and generating free cash flow.”
Delhaize said it will incur about $518 million in one-time charges, including $172 million for the Sweetbay store closings and $20 million for U.S. management layoff costs.
Contact reporter Emily Ford at 704-797-4264.