Food Lion 2003 Annual Report Download - page 21

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1999 2000 2001 2002 2003 1999 2000 2001 2002 2003
2003 2002 change
Number of stores 1,515 1,485 +30
Sales* 15,545.9 15,019.6 +3.5%
Operating margin 4.7% 4.4% -
Operating profit* 734.3 661.1 +11.1%
Net earnings* 93.1 146.4 -36.4%
* in millions of USD
Food Lion
“Take a Fresh Look“
In order to differentiate further from the competition, Food
Lion launched the renewal of an entire market where it held
a leading market share of over 30%. On October 1, 2003,
Food Lion reopened 68 stores in the Raleigh area of North
Carolina with a new décor, new merchandising fixtures,
expanded perishable offering and changes throughout the
stores in terms of product selection. Additionally, much
effort was put on training to make each associate the best
sales associate possible. Food Lion reintroduced itself to
the entire community and invited them to “Take a Fresh
Look at Food Lion.” In 2004, Food Lion will be taking this
successful program into a second market, Charlotte, North
Carolina.
At the beginning of 2003, Food Lion identified approximately
USD 100 million in cost savings in order to strengthen its
competitive position through low price leadership, while
maintaining its strong profitability. As part of the savings
program it was announced that 41 underperforming
stores would be closed in January 2003 and Food Lion’s
support structure would be streamlined. Additionally,
Food Lion took several measures to reduce its general
operating expenses, including the reduction of indirect
procurement costs, the introduction of new in-store
labor models for more effective work scheduling, and the
improvement of supply chain efficiencies. Thanks to these
drastic measures, Food Lion was able to improve its price
competitiveness and profitability.
In 2003, Food Lion began the rollout of a new inventory
system that enhances the tracking of units and costs for all
30,000 Food Lion items, including perishable products. The
system gives better visibility to item-level data, improving
margin analysis, shrink control and inventory management.
Adopted from its sister company, Hannaford, the system
was modified by Food Lion to accommodate their 1,200-
store business. The system was launched in the third
quarter of 2003 and will be rolled out to the complete store
network by the third quarter of 2004.
In conjunction with the introduction of the new inventory
management system, Food Lion changed from the Retail
Inventory Accounting Method to the Item Cost Accounting
Method. This improves product cost calculations by
eliminating the estimations inherent in averaging across
categories of products, as occurs with the former method.
As a result of all these efforts, Food Lion was able to
deliver cost savings dollars while still growing its top line.
Customers enjoyed more competitive pricing, increased
product assortment and services, along with a friendly and
convenient shopping experience.
1,276 1,420 1,459 1,485 1,515
Number of Stores Sales
(in billions of USD)
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Added 30 stores
for a total
of 1,515 stores
Welcomed fourth
banner, Harveys,
to the U.S. portfolio
Launched market
renewal program at Food
Lion in Raleigh, North
Carolina
Completed rollout of
the “Festival for the
Senses” at Hannaford
Open 58 new
stores and remodel
111 stores
Continue to deepen
differentiation from
competition and further
reinforce profi tability
at Hannaford
Launch market renewal
program in second
key Food Lion market,
Charlotte, North Carolina
Refocus Kash n’ Karry
on its core Florida
markets and introduce
Sweetbay Supermarket
brand
10.9 12.7 14.9 15.0 15.5