Reuters: Hot Stocks: UPDATE 2-Delhaize lifts profit forecast as cost cuts bear fruit

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UPDATE 2-Delhaize lifts profit forecast as cost cuts bear fruit Aug 8th 2013, 09:48 Thu Aug 8, 2013 5:48am EDT * FY profit forecast at least 780 mln euros vs 775 mln * Q2 profit beats expectations on improving margins * Shares surge to 2-year high (Adds CEO, analyst comment, detail, background, shares) By Ben Deighton BRUSSELS, Aug 8 (Reuters) - Belgian grocer Delhaize beat second-quarter profit expectations and nudged up its full-year forecast, sending its shares to a two-year high on signs a cost-cutting drive in its main U.S. market is paying off. Delhaize makes about two-third of its revenues in the United States and has been cutting costs, including renegotiating terms with suppliers, and revamping its main Food Lion chain to counter stiff competition and sluggish consumer spending. "Margins in all divisions were ahead of our expectations, with the U.S. the main driver of the beat," Deutsche Bank analysts said in a research note. Delhaize's shares rose as much as 9 percent to a two-year high of 52.5 euros on Thursday, the biggest increase on the STOXX Europe 600 retail index. Second-quarter adjusted operating profit rose 5.8 percent to 193 million euros ($257 million), beating analysts' average forecast for a 4.9 percent fall to 175 million. For the first half of the year, Delhaize's underlying operating margin in the United States was 4.1 percent, compared with 3.8 percent last year. That brings it roughly into line with Dutch rival Ahold , which saw its first-quarter operating margin in the United States - where it has over half of its sales - decline to 4.1 percent from 4.2 percent a year ago. Over the past three months, Ahold's shares have risen 1.8 percent, whereas Delhaize's shares have remained broadly flat. KBC analyst Pascale Weber said Delhaize was feeling the benefits from renegotiating terms with its U.S. suppliers at the end of last year. Delhaize said that overall its profit margin improved 16 basis points in the second quarter to 24.3 percent of revenues, as lower wholesale prices offset price cuts in its stores. That led it to nudge up its profit forecast for the full year to at least 780 million euros from 775 million previously. Second-quarter sales were up 1.7 percent at identical exchange rates, with comparable store sales up 1.1 percent in the United States and 0.8 percent in Belgium. ($1 = 0.7508 euros) (Editing by Elizabeth Piper and Mark Potter) Link this Share this Digg this Email Reprints

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