UPDATE 1-Delhaize's U.S. performance outweighs worries in Belgium

Thu Aug 7, 2014 7:55am EDT

* Takes 150 mln euros impairment on Serbia

* U.S. comparable sales +3.3 pct vs +2.5 pct expected

* Belgian comparable sales -1.2 pct vs -0.6 pct expected

* Shares biggest gainers in European retail index (Adds details on U.S. business, analyst comment, share reactio)

BRUSSELS, Aug 7 (Reuters) - Belgian supermarket group Delhaize reported a better-than-expected sales performance in the United States, outweighing a weak second quarter in its home market and Serbia.

Delhaize's U.S. business has seen a reversal of fortunes in recent quarters, as a project to overhaul Food Lion, its largest supermarket chain, starts to show results.

Same-store sales in the United States, where the group makes about 60 percent of its sales, rose 3.3 percent, ahead of the average 2.5 percent growth expected in a Reuters poll of four analysts.

The group's shares rose as much as 5 percent on Thursday, making them the strongest performer on the STOXX 600 European Retail Index. Delhaize has outperformed this index by a quarter since the start of 2014.

"A few years ago we said 'the United States is their biggest business and is underperforming' now it's the other way round," said Petercam analyst Fernand de Boer.

Delhaize, which also operates Hannaford supermarkets in the United States, said that U.S. profit margins should be flat for the whole of 2014, after falling slightly in the second quarter.

Delhaize said it has noticed more promotional activity by Kroger, the largest supermarket chain in the United States which acquired the Harris Teeter chain in the north-east, but had no immediate plans to respond.

"We are convinced that we are still cheaper," Chief Executive Frans Muller told a conference call after the results.

For the company as a whole, operating profit, adjusted for non-recurring items, fell 11 percent in the second quarter to 178 million euros ($238.24 million), above the 169 million expected in a Reuters poll of five analysts.

Delhaize repeated its 2014 outlook for capital expenses of 625 million and a target of 180 new store openings.

TOUGH TRADING IN BELGIUM, SERBIA

In Belgium, where Delhaize competes with Ahold, Colruyt, Carrefour and German hard discounters Aldi and Lidl, comparable sales fell 1.2 percent and the company lost market share.

A Reuters poll had expected sales in the country to fall 0.6 percent.

In June the group said it would cut 2,500 jobs in its Belgian business, which prompted industrial action towards the end of the second quarter and hit the sales performance.

The company said it would resume talks with trade unions over how to implement the restructuring of its Belgian business in September.

Delhaize said it took another 150 million euro impairment on its Serbian operations, as sales continued to decline and economic sentiment remained weak.

Delhaize bought Serbian retailer Delta Maxi, with operations across the Balkans, in 2011 for 932 million euros and has since then made a string of divestments and steadily written down the value of the unit.

Delhaize said that after the impairment, it still had some 120 million euros of goodwill and trade names on its books related to the Serbian acquisition.

"It's been a failed acquisition, but it was done at a time when the market was still much better so you can't blame them," Petercam's de Boer said. ($1 = 0.7472 Euros) (Reporting by Robert-Jan Bartunek; Editing by Erica Billingham)