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Delhaize Group SA (DEG)
Q3 2007 Earnings Call
November 8, 2007, 9:00 AM ET
Guy Elewaut - VP, IR and Corporate Communications
Pierre-Olivier Beckers - President and CEO
Craig Owens - EVP and CFO
Rick Anicetti - CEO, Food Lion
Ron Hodge - CEO, Hannaford
Michel Eckhout - CEO, Delhaize Belgium
Fernand de Boer - Petercam
Alistair Johnston - JP Morgan
Fabienne Caron - Morgan Stanley
Dan McFetrich - Dresdner Kleinwort Wasserstein
Todd Duvick - Banc of America
Xavier Le Mene - Credit Suisse
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Guy Elewaut - Vice President, Investor Relations and Corporate Communications
Thank you operator. Good afternoon everyone in Europe, good morning in the U.S. Welcome to the conference call concerning Delhaize Group's results in the third quarter of 2007. 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, Craig Owens, CFO of Delhaize Group, Rick Anicetti, CEO of Food Lion; Ron Hodge, CEO, Hannaford; and Michel Eeckhout, CEO, Delhaize Belgium.
During this call, we will first look back on our performance in the third quarter of 2007 followed by comments on operations and strategy. Afterwards, we will take questions. For those unable to stay on the call or who wish to listen to it again, a replay will be available on the company's website. I will now turn it to Pierre Beckers for introduction of our third quarter results.
Pierre-Olivier Beckers - President and Chief Executive Officer
Thank you Guy. Hello everyone and thank you for joining our conference call. Delhaize Group's third quarter results contributed to the strong year we are having in 2007. We are very happy with the sales and profit performance of our operations in the US. We realized 4.6% comparable store sales growth, the highest since 2000, driven by volume growth at all of our US companies. Food Lion and Hannaford continued their strong sales momentum while Sweetbay realized its strongest comparable store sales growth since the launch of the conversion project, showing encouraging signs in the rebranding of our Florida business.
Also our Greek, Romanian, and Indonesian businesses performed very well realizing now for more than a year quarter after quarter double-digit revenue growth. Only the performance of Delhaize Belgium, which cycled its strongest quarter of 2006, was below our expectations due to the intense competitive... competition and bad weather during the summer months and significant price investments to gain sales and support our price strategy.
During the third quarter, we succeeded in keeping our margins at their industry-leading levels, offsetting the price investments by Delhaize Belgium, Sweetbay and Hannaford, with the positive impact on gross margins of our sales mix initiatives, better shrink management at Hannaford and Sweetbay, and good cost control overall.
The strong sales performance during the third quarter allows us to increase our US comparable store sales guidance for the full year and to confirm our Group sales and profit guidance communicated in August at the time of the announcement of our second quarter results.
I will now turn to Craig... Craig Owens for an introduction of our second quarter results. Craig?
Craig Owens - Executive Vice President and Chief Financial Officer
Thank you Pierre-Olivier. Welcome everyone. In the third quarter of the year, Delhaize Group revenues decreased by 1.3%, a decrease due entirely to the weakening of the US dollar by 7.2% against the euro. Our organic sales growth amounted to 4.6% on top of a very good third quarter in 2006 when we posted 6% organic sales growth. All of our US operations and Alfa-Beta in Greece showed strong revenue growth during the most recent quarter.
Our US revenues increased by 5.4% and comparable store sales grew by 4.6% based on a continued positive sales performance at Food Lion and Hannaford, and better sales at Sweetbay. More customer traffic at Food Lion and Hannaford was the chief driver of the volume growth in the US operations. And at Sweetbay, the finalization of the store conversions and the increased price investments have resulted in stronger sales in Florida in spite of some underperforming stores.
In Belgium, total revenues decreased by 2.4%, largely due to the fact that prior year revenues included those of Di, health and body care stores that were sold in the second quarter of this year. Additionally, this quarter's revenues were impacted by a less favorable calendar. Adjusted for both of those elements, Delhaize Belgium revenues increased by 1.2%.