Ahold sees better deals if it waits

LONDON (Reuters) - Dutch grocer Ahold (AHLN.AS) believes it could pay to wait before making an acquisition in its main U.S. market, as trading conditions are likely to stay tough throughout this year and pile pressure on competitors.

Chief Executive John Rishton told the Reuters Consumer and Retail Summit on Wednesday that U.S. consumer spending had not changed significantly in recent months and was unlikely to do so until unemployment, and underemployment, started to fall.

"And I don't think that's (going to be) this year," he said.

That could play into Ahold's hands because it refocused on low prices and cut costs before U.S. rivals such as Supervalu (SVU.N) and Safeway (SWY.N), and is now looking to spend its 2-billion-euro-plus ($2.7 billion) cash pile on acquisitions.

"I'm quite happy, in many ways, if the current environment continues for longer," Rishton said. "The pressure is increasing and I think a number of our competitors are feeling the pain."

"I think the pressure needs to increase some more," he added, arguing the U.S. grocery market had only been under intense strain for six or seven months.

Rishton said Ahold, which makes about 60 percent of its sales in the United States and also runs Dutch market leader Albert Heijn, would not be rushed into doing deals.

"The cynics would say that the only people that benefit out of an M&A transaction are the shareholders of the acquired company. So the trick is getting the timing right and the price right," he said.

If it cannot find the right deal, Ahold could return more cash to shareholders, Rishton added, though he indicated it was in no hurry to do this either, as its current 500-million-euro share buyback program is being spread out over a year.

COMPETITION

Rishton noted recent price cuts by competitors, in particular Wal-Mart (WMT.N), the world's biggest retailer.

But he said Ahold knew from its own experience that it took a long time to change customers' perceptions as many retailers cut prices for a short time, only to reverse them later.

"Wal-Mart have done this in the past and they've stopped it. Whether they stop it this time or it's continuous, I don't know."

Rishton said he was monitoring Wal-Mart's moves to convert a small number of its non-food discount stores into supercentres, which would sell food and compete more directly with Ahold.

He was not overly concerned, however, noting that Ahold's Giant-Carlisle chain already competes directly with Wal-Mart and grew market share in the first quarter of its financial year.

BEESIE BOOST

Ahold, which trades from over 3,500 stores in 11 countries, posted a 3 percent rise in first-quarter operating profit, driven by stronger than expected sales in the Netherlands.

Rishton said this was a continuation of a recent strong performance and not a sign, as some analysts have suggested, that the group is benefiting from disruption at rival Jumbo as it integrates its recent purchase of Super de Boer.

"I don't think we've seen very much disruption," he said.

Ahold expected a "good boost" to sales in its fiscal second quarter from the soccer World Cup, although Rishton was skeptical how much of that would reach the bottom line as most of the extra demand was for goods on promotion, like beer.

Ahold is distributing 31 million furry Dutch team mascots which it has called "Beesies" and said it has sold out of Beesie caps and snake puppets.

Rishton said the group, which also operates in the Czech Republic, Slovakia, Norway, Sweden and Baltic countries, had not noticed a change in customer behavior since the debt crisis in Greece sparked a fresh bout of financial market turmoil.

"We haven't seen any decline or increased nervousness. But I think there is a risk that it tips one way and an opportunity, it goes the other," he said, adding that would depend on whether governments can cut their debts without hitting consumers too hard.

($1=.7453 euros)

(Additional reporting by James Davey; Editing by Greg Mahlich)