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Delhaize to cut 2,500 Belgian jobs to tackle falling margins
June 11, 2014 / 11:17 AM / in 3 years

Delhaize to cut 2,500 Belgian jobs to tackle falling margins

BRUSSELS (Reuters) - Belgian supermarket chain Delhaize will cut up to 2,500 jobs at its Belgian operations over the next three years, about 15 percent of its workforce there, to restore margins hit by high wage costs and tough competition, it said on Wednesday.

Delhaize, which competes with Carrefour, Colruyt, discounters Aldi and Lidl and increasingly Ahold’s Albert Heijn, said this was necessary as margins at its company-operated stores had fallen by 78 percent since 2010.

“The announcement does not come as a surprise. The size of the restructuring is however much larger than anticipated,” Bank Degroof analyst Hans D‘Haese wrote in a note to clients.

Delhaize’s shares rose as much as 1.7 percent to a two-week high after the announcement.

The group said wage and benefit costs were 16 percent higher than at Colruyt and 33 percent higher than at Dutch chain Albert Heijn, which only recently entered the Belgian market and now has 20 stores in the north of the country.

“New entrant Albert Heijn has a competitive advantage not only because its workforce is young but also because it can source products at a lower price in the Netherlands,” KBC Securities analyst Pascal Weber wrote.

Delhaize, which over the past years has also invested heavily in a turnaround of its Food Lion stores in the United States, said it would make an additional investment of 450 million euros ($613 million) in the Belgian stores, mainly focusing on efficiency programs and remodeling.

The news comes two years after Delhaize cut around 5,000 jobs and closed stores in the United States and southeastern Europe. The company, which makes most of its money in the United States, employed 160,000 people at the end of 2013.

As part of the Belgian restructuring, the group will close 14 underperforming company-operated stores of a total of 147 in the country.

It also has a large number of smaller stores, operating as franchises, which will not affected by the announcement.

Delhaize is not the only grocer to have felt the pinch in Belgium. In 2010, French group Carrefour cut about 1,100 jobs there and closed several of its large hypermarkets.

Editing by Philip Blenkinsop and Mark Potter

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