18 Nov 2009
Nov. 18 (Bloomberg) -- Royal Ahold NV, the owner of the U.S. Stop & Shop grocery chain, will cut 350 million euros ($521 million) in expenses and pursue expansion opportunities after reporting third-quarter profit that beat analysts' estimates.Ahold plans the reduction by the end of 2012, the Amsterdam-based company said in a statement today. Third-quarter net income rose to 238 million euros from 195 million euros in the year-earlier period, according to the statement. That compared with an average estimate of 179 million euros in a Bloomberg survey of eight analysts.
Ahold will "pursue opportunities to grow within existing and new markets," following a management reshuffle this month, Chief Executive Officer John Rishton said in the statement. The company should use its excess cash of about 2 billion euros to make acquisitions or buy back stock to avoid becoming a bid target, analysts including Petercam's Fernand de Boer have said.
Rishton, who is completing a plan to cut 500 million euros in expenses, boosted profitability at Stop & Shop by reducing prices to spur volume growth. Operating profit at Albert Heijn, the biggest Dutch grocery chain, rose 5 percent and Ahold sold more goods in all markets, it said today.
"These are robust numbers, given market conditions," said SNS Securities analyst Richard Withagen today. "Especially profit at Albert Heijn exceeded expectations." Withagen rates Ahold stock "accumulate."
Albert Heijn
Operating profit at the Dutch chain was 147 million euros, boosted by store disposals. Withagen had estimated profit on that basis to drop 2.9 percent to 136 million euros. Same-store sales at the chain fell for the first time in almost six years on increased discounting.
Ahold yesterday gained 0.5 percent to 9.15 euros in Amsterdam trading, giving the company a market value of 10.8 billion euros. The stock has risen 4 percent this year.
Belgian rival Delhaize Group, owner of the U.S. Food Lion stores, would be a likely industry buyer of Ahold while U.K. market leader Tesco Plc should consider buying the Dutch company, ING analysts have said.
