Royal Ahold NV, the owner of the Stop & Shop and Albert Heijn grocery chains, said fourth-quarter earnings dropped as spending on sales promotions in the pre-Christmas shopping period weighed on its operating margin.
Underlying operating income fell 5.6 per cent to €302 million ($343 million), the Zaandam, Netherlands-based company said in a statement today. On average, analysts surveyed by Bloomberg estimated earnings of €304 million. Sales increased 7.9 per cent to €8.06 billion. Ahold also said it plans a share buyback of as much as €500 million in the next 12 months.
Earnings as a proportion of sales declined because of the costs of product promotions in the US and the integration of the Spar supermarket chain in the Czech Republic, Ahold said. The retailer also widened discounts to draw in shoppers at its Albert Heijn outlets in Europe and online platforms during the Christmas period, which boosted revenue while eroding margins.
The retailer is investing in Internet-based businesses as consumers increasingly seek convenience. The company has a goal of driving online sales to €2.5 billion by the end of 2017. The company also operates smaller shops in city centers to cater to urban shoppers.
Ahold fell 0.9 per cent to €17.03 at the close in Amsterdam on Wednesday, valuing the company at €15.2 billion.
Bloomberg News, edited by ESM
