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CORRECTED-UPDATE 1-Delhaize sees profits at lower end of range
August 22, 2012 / 6:05 AM / 5 years ago

CORRECTED-UPDATE 1-Delhaize sees profits at lower end of range

(Corrects comparable Belgian sales growth as 1.1 pct instead of 0.2 pct)

* Adj. op profit 184 mln euros vs 177 mln euros

* 2012 cost savings to reach 550 mln euros from 500 mln previously

BRUSSELS, Aug 22 (Reuters) - Belgian supermarkets operator Delhaize on Wednesday said that its 2012 profits would be at the bottom end of its guidance range because of price cuts and costs linked to refurbishing its stores.

The group, which expects operating profits to fall by between 15 and 20 percent in 2012, posted a 12 percent decline in second-quarter adjusted operating profits to 184 million euros, above the 177 million euros expected in a Reuters poll of eight analysts.

Delhaize said its cost cutting programme was on track to generate 550 million euros of savings by the end of the year, above its previous expectation of 500 million.

In the United States, which accounts for 65 pct of the group’s sales, same store sales fell 0.6 percent from the comparative period last year, excluding a negative calendar effect of 0.4 percent. Analysts polled by Reuters had expected a decline of 1.3 percent.

Delhaize said that the refurbishing of its Food Lion stores continued and 65 percent of all stores had been converted. The group expects this to support its sales for the rest of 2012.

Operating margin in the United States fell to 3.3 percent in the second quarter of 2012, down from 4.3 percent at the same period last year. Delhaize said it had not passed on most of the food price inflation to customers.

Competition is heating up in United States with Kroger , the largest supermarket company, and Wal-Mart, the world’s largest retailer keeping prices low.

In July, Supervalu, the third-largest U.S. supermarket chain, suspended its dividend to fund aggressive price cuts aimed at winning back shoppers, while Safeway said increased spending on advertising ate into profits.

In Belgium, same store sales increased 1.1 pct ahead of expectations of a 0.85 percent fall.

Operating margins in Belgium decreased to 3.8 percent from 4.8 percent last year, as Delhaize offered lower prices to its customers and paid higher wages to its staff because of Belgium’s automatic salary adjustment for inflation. (Reporting By Robert-Jan Bartunek; editing by Barbara Lewis)

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