Dutch supermarket group Ahold reported second-quarter profit above forecasts on Thursday, as it increased market share and clamped down on costs, convincing investors of its operational strength. Ahold adopted an extensive store revamp in 2006 ahead of competitors and before the economic downturn. Which has been luring shoppers to its stores in Europe and the US, where it competes against heavyweights such as Wal-Mart Stores Inc and Kroger.
Its shares rose over 5 percent after the Amsterdam-based company said second-quarter earnings before interest and taxes (EBIT) rose to 295 million euros ($416 million) from 235 million a year ago, beating analysts' forecast for 276 million.
Ahold, which owns the Netherlands' biggest supermarket chain Albert Heijn but makes just over half of its sales in the United States, said it was able to increase profitability at the same time as it took market share away from competitors, particularly for its US franchises Stop & Shop and Giant-Landover.
"In a recession the strong will get relatively stronger and the weak will get relatively weaker, and we are one of the strong," chief executive John Rishton told reporters. Ahold and rivals such as Safeway Inc have been cutting prices to deal with the recession on both sides of the Atlantic. But it has been winning market share as other retailers such as Germany's Metro reported shrinking margins and revised down forecasts for the second half of the year.
Rishton said Ahold would "jump on any opportunities" if competitors put any of their stores up for sale, but told Reuters that cash would deployed both for compensating shareholders and acquisitions, as in the past. He also added that Ahold was on track to deliver its goal of reducing operating costs by 500 million euros by the end of this year. Rishton declined to forecast retail margins due to market uncertainty, as he has done since the recession set in.
"Ahold's strategy and execution are best in class," said SNS Securities analyst Richard Withagen. "It's definitely a buy." "But they're also noting that the environment is getting increasingly competitive," he added. Shares in Ahold, which are up nearly 30 percent from a two-year low set in late 2008, were up 4.3 percent at 8.49 euros at 0924 GMT, having touched 8.58 euros earlier, while the DJ Stoxx European retail index was up 1.5 percent.
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