* Q4 operating profit 341 mln euros, vs forecast 339 mln
* To return 500 mln euros to investors, dividend up 28 pct
* Says outlook tough, but keeps sales, margin targets
* Says cash return does not affect acquisition ambitions
* Shares jump 4.7 percent to 21-month high
(Adds more CEO, analyst comments, shares, detail, background)
By Mark Potter
LONDON, March 4 (Reuters) - Dutch grocer Ahold AHLN.AS unveiled plans to return 500 million euros ($683 million) to investors, raising hopes it can cope with weak consumer demand that hit quarterly earnings and won’t overspend on acquisitions.
Shares in Ahold, which runs Dutch market leader Albert Heijn but makes about 60 percent of its sales in the United States, were up 4.7 percent to a 21-month high of 9.62 euros at 1030 GMT on Thursday, the biggest rise among European blue chips.
Ahold, which competes against U.S. heavyweights like Safeway SWY.N and Kroger (KR.N), met forecasts with an 8 percent fall in quarterly profit as it boosted promotions to lure shoppers, and said it had seen little improvement in consumer behaviour.
However, it also said it was taking market share and showing its confidence in the future by hiking its dividend, raising capital spending, and keeping its medium-term targets to grow sales and profit margins by 5 percent.
“We expect material consensus upgrades to underlying numbers,” said Credit Suisse analysts, adding that the share buyback and solid results came on top of benefits from a stronger dollar and Ahold’s November announcement it planned to cut more than 350 million euros in costs.
Ahold chief executive John Rishton said the cash return would not affect plans to look for acquisitions in existing and adjacent markets, as the group had over 2 billion euros cash and continued to generate more.
But the Credit Suisse analysts said the buyback could allay fears Ahold would be “overly aggressive” in any purchases.
Retailers across the world are struggling amid signs a tentative economic recovery is yet to boost consumer spending and fears that moves to cut government deficits, like raising taxes and cutting public spending, could knock confidence.
Data on Wednesday showed euro zone retail sales fell 0.3 percent month-on-month in January, while French grocer Casino (CASP.PA) on Thursday reported a 4.5 percent fall in 2009 underlying earnings. [ID:nLDE62219W] [ID:nLDE6220XS]
Rishton told Reuters he had seen no big change in consumer behaviour since the end of 2009 and confidence was likely to stay fragile until unemployment started to fall. [ID:nLDE6230L3]
Ahold, which trades from over 3,500 stores in 11 countries, said it made an operating profit of 341 million euros in the last quarter of 2009, in line with a 339 million forecast in a Reuters poll. [ID:nLDE61P1OR]
The group has faced particularly tough conditions in the United States where falling food prices have been exacerbated by a price war. But it has been taking market share thanks to a drive to focus on low prices that started before the recession.
Rishton said he expected food price deflation to persist for at least the first half of 2010 and he was hoping for a return to inflation towards “the back end” of the year.
Ahold said it was raising capital spending to 1.1 billion euros this year from around 800 million in 2009, and lifting its dividend 28 percent to 0.23 euro.
Its shares have lagged the STOXX Europe 600 retail index .SXRP by 22 percent over the past year and trade at 11.3 times earnings forecasts for 2010, just below Belgian rival Delhaize DELB.BR and far behind Europe’s biggest retailer Carrefour (CARR.PA) and world No.1 Wal-Mart (WMT.N), according to Reuters data.
“We believe (this) is unjustified,” said RBS analyst Justin Scarborough, keeping a ‘buy’ rating on the shares. (Editing by Dan Lalor and David Cowell) ($1 = 0.7328 euros)