Ahold's U.S. stores hurt by Wal-Mart's battle for supremacy

[November 17, 2016]  By Toby Sterling

AMSTERDAM (Reuters) - Wal-Mart's determination to remain the cheapest U.S. food retailer in the face of competition from German discount stores has hurt Ahold's business in the U.S., the CEO of Ahold Delhaize said in an interview on Thursday.

Ahold, the Dutch retailer that runs U.S. supermarket chains Stop & Shop, Giant, Hannaford and Food Lion, among others, earlier reported a 4.3 percent rise in third-quarter underlying operating income to 513 million euros ($549 million) but missed analyst expectations due to its U.S. performance.

CEO Dick Boer said in an interview that the stores most feeling the pinch were its Food Lion shops, of which there are 1,100 situated in Southern U.S. states.

“During the second and third quarter, there was aggressive pricing from Wal-Mart, it's well known in the market, and of course we had to follow to keep our competitive position," he said.

He said Ahold is keenly aware of the ongoing U.S. expansion of German retailer Aldi, and plans by another German discount chain, Lidl, to open stores on the U.S. East Coast.

"For sure, every competitor coming into a market is, for us, and for everyone I think, a signal to be more alert than before,” he said.

“Aldi is known in the markets, clearly we have seen them continue to grow in the markets where we operate.” He cited the Philadelphia area as an example.

“So that's what drives also I think the actions of Wal-Mart in the Southern states, to be sure that with the discounters coming in that Wal-Mart still keeps its price leadership," Boer said.

"I think that's one of the promises they continue to want to make. This will have a continuing effect on our markets."

Wal-Mart on Thursday reported third quarter earnings with worse than expected sales, also due to falling food prices. [L1N1DI0IN]

Dick Boer, chief executive of Dutch-based supermarkets operator Ahold, speaks during a joint news conference with Frans Muller (not pictured), chief executive of Belgian supermarket chain Delhaize, in Brussels, Belgium June 24, 2015. REUTERS/Eric Vidal

Food Lion has been cutting prices and remodeling stores to make them easier for customers to navigate and find on-sale items as it tries to reposition itself.

Boer said Ahold is familiar with both German chains due to their growth in the Netherlands. Ahold owns the dominant Dutch chain Albert Heijn, which has thrived despite a German onslaught.

"As a European retailer in the U.S...we are sharing a lot of our information about the work Lidl and Aldi are doing in (the Dutch market) to help our American colleagues to be well-prepared.”

Boer also said he expects commodity price deflation, which has impacted meat and dairy prices, to ease next year. He said it was too early to say whether the election of Donald Trump as the next U.S. president would lead to higher inflation, as some investors are speculating.

Ahold shares were down 2.6 percent at 20.11 euros at 1348 GMT in Amsterdam.

(Reporting by Toby Sterling; Editing by Elaine Hardcastle)
 

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