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UPDATE 1-Ahold cost cuts support margin at year end
February 27, 2014 / 9:21 AM / 4 years ago

UPDATE 1-Ahold cost cuts support margin at year end

* Q4 underlying op profit 320 mln euros vs 307 mln expected

* Q4 margin 4.3 pct vs 4.0 in Q3 and 4.6 in Q412

* Sees no impact from heavy winter weather in U.S.

* Says any recovery in consumer spending will be slow (Adds details on U.S., Dutch business, strategy)

BRUSSELS, Feb 27 (Reuters) - Dutch supermarket group Ahold on Thursday posted a higher-than-expected operating profit in the fourth quarter as the group’s cost cutting efforts helped prop up its margins as shoppers bought less.

Profit margins contracted to 4.3 percent from 4.6 percent in the fourth quarter of 2012, caused by higher pension costs and a weaker dollar, but rose from the 4.0 percent in the third quarter.

The group said it had already completed 485 million euros of its 600 million euro cost reduction programme which runs until the end of 2014.

Underlying operating profit fell 7.5 percent in the fourth quarter to 320 million euros ($437.3 million), ahead of the 307 million expected in a Reuters poll of 12 analysts.

Ahold’s shares rose 4.9 percent to their highest level since November 2013 in early trading and were among the strongest in the FTSEurofirst 300 index of leading European stocks.

“The margins show that they’re a quality retailer which does not need to spend lots of money on vouchers to keep consumers in its stores,” said Sanford Bernstein analyst Bruno Monteyne.

The group remained cautious about its 2014 prospects, however, saying that any improvement in consumer spending would be gradual, as the food retail industry reacted to economic change slower than other sectors.

“The final quarter of 2013 was particularly tough across all our markets so understandably we start 2014 with a cautious outlook,” Chief Executive Dick Boer told a conference call.

“Customers habits are not changing quickly. On top of that, our industry is not the first one to feel the downturn nor the first in line when the economy picks up.”

Ahold, which operates the Stop&Shop and Giant chains from Virginia to Massachusetts, said it did not expect the harsh winter weather in the United States to impact sales as customers in the Northeast were used to snow and cold.

In the Netherlands, where Ahold operates market leader Albert Heijn, consumers put fewer items in their shopping baskets but the chain’s market share improved to 33.8 percent.

The company said it would push hard to expand its online business. Grocery sales via the web at Peapod and albert.nl as well as revenues at its Amazon challenger bol.com grew by 16.9 percent in 2013 to a combined 1.1 billion euros.

“I‘m sure that we will continue the double-digit trend line,” Boer said.

The group, which makes three-fifths of its revenue in the United States, said in January that fourth-quarter sales fell by 4.2 percent, or 1.1 percent at constant exchange rates, to 7.47 billion euros ($10.2 billion).

Ahold upped its dividend to 0.47 euros per share from the 0.44 it paid out for 2012. ($1 = 0.7317 euros) (Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop)

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