Delhaize posted its results for the full-year 2012 which have been in line with the analysts expectations of a long-term decline of the operating margin. The company’s EBIT margin declined by 100 basis points due to price investments caused by a competitive environment in the US food retailing business. In this way, because the company needed to stay competitive, the management had to cut the divident to 1.40 euro from 1.76 euro earlier.
Delhaize’s full-year EBIT margin fell by 105 basis points to 3.45% in 2012, from 4.5% a year ago, almost in line with the forecasts. The decline, however, excludes the 125 million euro the company paid as store-closing expenses and 270 million euro in impairment charges related to Maxi and Sweetbay store closures. However, the aforementioned operating margin declines in the US, where the company derives most of its sales and earnings was the main reason for the decline of the EBIT margin.
The decrease of the gross margin rate caused the decline of the profit margin, with Delhaize continuing to lower its prices to keep its market share from falling. This looks as a smart move for the long-term, even though it is affecting significantly the company’s profit margins. In addition, the company reported 1.04 euro per share under IFRS.
The sales have been reported by Delhaize earlier this year with comparable stores sales in the US (where, as we said, the company obtains most of its profits from) recovered from a 1.9% decline in the previous quarter to flat at the end of 2012. Moreover, same-store sales in the Belgium market, where Delhaize is based, picked up to 0.8%, from 0.6% in the previous quarter.
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