Ahold's Profit Meets Forecasts, Raises 2008 Target

Dutch supermarket group Ahold reported first-quarter operating profit in line with forecasts on Friday and raised its 2008 target after an asset sale, saying it was coping with tougher economic conditions.


The supermarket group, the seventh-biggest in the world by sales, made 336 million euros ($518.4 million) in operating profit, up 7.3 percent and broadly in line with an average forecast of 341 million euros by 16 analysts polled by Reuters.

Net profit rose 8.3 percent to 261 million euros beating an average forecast of 213 million.

"Overall these are pretty solid results. My fear was that the value improvement program would have a big negative impact in the first quarter but that is not the case or at least it is to a lesser extent than I expected," said Fortis analyst Robert Jan Vos.

Ahold owns the Netherlands' biggest supermarket chain Albert Heijn but derives just over half of its sales in the United States where it is overhauling stores and cutting prices under a program called value improvement.

"The price investments related to the roll-out continue to impact margins and sales, with improvements expected later in the year," Chief Executive John Rishton said in a statement.

"We continue to respond to the turbulent economic environment and its impact on consumer and competitor behavior. We are confident that the actions we are taking to bring value to our customers are the right ones."

Ahold raised its underlying retail operating margin target to 4.8-5.3 percent for this year from 4.5-5 percent, helped by the sale of its majority stake in Schuitema to British private equity firm CVC Capital Partners in April.

Main U.S. chains Stop&Shop and Giant-Landover had $202 million in operating profit, down 11.4 percent, compared with an average forecast for $189 million.

Giant-Carlisle posted a higher-than-expected 16 percent rise in operating profit to $72 million.

Hurt by the weak economy, the credit crisis and higher fuel cost, consumers in the United States have reined in spending, prompting retailers to cut prices and launch aggressive promotions.

Last month, world number one Wal-Mart Stores reported a higher quarterly profit as discounts attracted bargain-seeking shoppers, but it issued a cautious outlook.

Ahold said its Dutch unit Albert Heijn made 189 million euros in operating profit, up 26 percent but below an average forecast of 196 million euros.

Analysts said the projected improvement in the group's U.S. operations and Albert Heijn's sustained robust performance should continue to drive longer-term value.

Ahold shares ended at 9.55 euros on Friday, down 3.3 percent on the day.