CORRECTED-UPDATE 2-Ahold beats expectations on strong Dutch performance
(Corrects Reuters instrument code for Tesco in paragraph 15)
* Underlying op. profit 338 mln euros vs 320 mln expected
* Shares biggest gainers among European blue-chips
* Gains market share in Netherlands
* U.S. identical sales growth slows to 0.3 pct in second quarter
By Robert-Jan Bartunek
BRUSSELS, Aug 22 (Reuters) - Dutch grocer Ahold beat forecasts for quarterly operating profit as cost cuts and market-share gains in the Netherlands offset a weak performance in the United States, its largest market.
Ahold also said it would give an update on how it planned to use the remaining proceeds from the sale of its stake in Nordic grocer ICA by the end of the year, raising the prospect of acquisitions or further payouts to shareholders.
Shares in Ahold - which operates market leader Albert Heijn in the Netherlands and Stop&Shop and Giant stores in the United State - rose as much as 5.2 percent on Thursday, making them the strongest performer on the FTSEurofirst 300 Index of leading European shares.
Operating profit (EBIT) adjusted for one-off items increased by 4 percent in the second quarter to 338 million euros ($452.1 million) ahead of the 320 million expected in a Reuters poll of eight analysts.
This was mainly due to a 13 percent underlying operating profit growth in the Netherlands. Operating profit in the United States fell by 5.2 percent year-on-year.
"There are two positives and one negative in the results and after Wal-Mart's disappointing results last week the shares had come under pressure," said Petercam analyst Fernand De Boer.
Last week, U.S. retail giant Wal-Mart Stores Inc reported a surprise decline in quarterly same-store sales in the United States and cut its outlook for the full year.
Analysts highlighted a strong improvement in the margin at Ahold's Dutch operations, which rose to 5.5 percent from 5.1 percent a year earlier. That helped boost the group operating margin to 4.4 percent, compared with a peer median of 3.4 percent according to Thomson Reuters data.
Ahold said it was cautious for the remainder of the year as consumers were still buying less and choosing cheaper products.
Sales excluding fuel at stores open for at least a year in the United States, which accounts for more than 60 percent of Ahold's revenues, rose by 0.3 percent. That was below the 1.5 percent growth seen in a consensus of four analysts and below the 1.9 percent of the first quarter.
Higher payroll taxes and more expensive fuel have impacted middle- and lower-income spending, pointing to an uneven recovery of the world's largest economy.
Ahold said that it was continuing to focus on initiatives such as own brands to improve margins and create customer loyalty.
In the Netherlands 54 percent of the goods Ahold sells are already own brands, whereas in the United States this number is lower at 37 percent.
"Margin-wise the private labels are contributing well and don't forget loyalty, if you're loyal to a certain product you're quick to come back," Chief Executive Dick Boer told a conference call.
Ahold shares are trading at a discount to many of their peers on 12.8 times expected 2013 earnings, compared with 15.6 times for Carrefour and 14.8 times for Metro, but at a premium to Tesco on 10.9 times.
After selling its stake in Nordic retailer ICA for 20 billion Swedish crowns ($3.05 billion), Ahold in June quadrupled its share buyback programme to 2 billion euros ($2.68 billion).
The company said previously it would strike a balance between returning the cash to shareholders and making acquisitions.
"They have a buyback of 2 billion until the end of next year. If you add the free cash flow until then you have another 2 billion they could spend," Petercam's De Boer said. ($1 = 0.7476 euros) ($1 = 6.5639 Swedish crowns) (Reporting by Robert-Jan Bartunek; Editing by Philip Blenkinsop and Erica Billingham)
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