Delhaize Group. (DEG)
Q1 2010 Earnings Call
May 5, 2010 09:00 a.m. ET
Garrett Bowne - VP of IR and External communications
Pierre-Olivier Beckers - CEO
Stéfan Descheemaeker - CFO
Rick Anicetti - CEO, Delhaize America Shared Services
Ron Hodge, CEO, Delhaize America Operations
Michel Eeckhout - CEO, Delhaize Belgium.
James Anstead - Barclays Capital
Fernand de Boer - Petercam
Edouard Aubin - Morgan Stanley
Fabienne Caron - Bryan Garnier
Alastair Johnston - Citigroup
John Kershaw - Banc of America/Merrill Lynch
James Grzinic - Jefferies & Co.
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Thank you operator. Good afternoon everyone in Europe, good morning in the U.S. Welcome to the conference call concerning Delhaize Group's results for the first quarter of 2010.
This presentation contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statements. Factors that could cause results to differ materially from those in the forward-looking statements are detailed from time to time in reports filed by the company with the SEC. These forward-looking statements are made as of the date of this presentation. Delhaize Group assumes no obligation to update the information contained in this presentation.
An audio webcast of this conference call will be available on the company's website. Delhaize Group reserves all rights to the content of this webcast and this webcast cannot be recorded or otherwise reproduced without the prior express written consent of Delhaize Group.
Today we have the following people with us. Pierre-Olivier Beckers, CEO of Delhaize Group, Stéfan Descheemaeker, CFO of Delhaize Group, Rick Anicetti, CEO of Delhaize America Shared Services; Ron Hodge, CEO, Delhaize America Operation; and Michel Eeckhout, CEO, Delhaize Belgium.
During this call, we will first look back on our performance in the first quarter of 2010 followed by comments on operations and strategy. Afterwards, we will take questions. For those who are unable to stay on the call or who wish to listen to it again, a replay will be available on the company's website later today.
I'll now turn to Pierre-Olivier Beckers, for an introduction of our first quarter results.
Thank you, Garrett. Hello everyone and thank you for joining our conference call. Just a couple weeks ago when we announced our full year 2009 results, we spoke about new game plan, our comprehensive strategic plan aimed at accelerating profitable revenue growth. In this quarter, our operating companies effectively started to executive their new sales building and cost savings initiatives that make up this plan.
Despite a tough comparison with last year’s highly inflationary environment, the still challenging economic times we face today, and our significant price investments, started at the beginning of this year, particularly at Food Lion, our revenues increased by 1.7% at identical exchange rate.
Indeed, all our banners continued their price investments to achieve value leadership in their respective markets. In the U.S. the volume trends we saw in 2009 continued to improve and net real growth was almost flat in this quarter.
Delhaize Belgium generated outstanding results as the virtuous cycle of growth accelerates. Excellent revenue momentum, led there to uninterrupted strong weekly market share gains for the last 15 months. Furthermore, cost savings and sales leverage led to increasing operating margins.
Our Group’s operating margin remained stable at strong 4.9% at identical exchange rate. This is compelling evidence of our ability to maintain profitability at higher level even during times of unfavorable U.S. sales leverage.
Our cost savings projects are delivering and as a result our SG&A expenses as a percentage of revenues are decreasing as a result of local and regional cost savings projects.
We are solidly committed to our new game plan and while we remain cautious for the rest of the year, knowing that the profound changes to our pricing strategy will take time to deliver. We are convinced that our strategic growth initiatives supported by our solid balance sheet, leading brands and market positions, also the excellence in execution and our strong management teams, all of that enable us to confirm our guidance of 2 to 5% operating profit growth, or 7 to 10%, that you will at identical exchange rates between two last years restructuring, store closing and impairment charges.
Stéfan will now provide you with some additional color on the first quarter results and I will come back later to give you a brief updates on some current strategic initiatives. Stéfan?.
Thank you, Pierre-Olivier and welcome everyone. As usual, I will review our figures based on identical exchange rates. In this quarter, the US dollar has weakened on average by 5.8% against euro, but obviously compared to the first quarter of last year.
As Pierre-Olivier just indicated Delhaize Group continued to grow greatly, despite the challenging economic environment, revenue growth amount to 1.7% for the Group. In the U.S., our revenue decreased by 0.4% and our comparable store sales growth was negative 1.8% or negative 1.2% when not adjusting for the impact of these two.
Adjusting or comparable store sales growth for retail deflation, real net growth for the quarter turned almost flat up to more than two years of negative though improving volume trends. Retail food deflation was 1.6% in the first quarter of this year, compared to inflation of 4.1% in the first quarter of last year. Our cost price inflation was flat and the 160 basis points gap between our retail price and our cost price inflation results from the major price investments we started in January, mostly at Food Lion.