Food Lion 2006 Annual Report Download - page 4

DELHAIZE GROUP / ANNUAL REPORT 2006
2
In 2006, Delhaize Group delivered on its strategy to increase sales
momentum while maintaining industry-leading margins. All of
our key operating companies had positive sales momentum,
resulting in the fourth consecutive year of accelerating sales
growth for the Group. At identical exchange rates, sales growth
was 5.5%, a growth rate at the top end of our expectations.
Our strong sales performance in 2006 was driven primarily by
successful commercial initiatives in existing stores, resulting in
comparable store sales growth of 2.7% in the U.S. and 2.8% in
Belgium. Alfa-Beta posted excellent sales growth as well, for
the fi rst time crossing the EUR 1 billion mark. All our operating
companies further strengthened their customer differentiation
through innovations in assortment, convenience and service.
Food Lion, our largest business, implemented the fi rst
initiatives based on its customer segmentation work. Hannaford
successfully launched an innovative in-store nutrition navigation
system called Guiding Stars. Delhaize Belgium signifi cantly
invested in its price position and price image, resulting in strong
market share growth.
Our operating companies also continued the expansion of
our network to 2,705 stores by year-end and their renewal
and conversion work with more than 170 stores remodeled
throughout the Group. Hannaford opened 14 stores, its highest
number ever in a year. Food Lion converted some of its stores in
the Washington, DC market to Bloom and Bottom Dollar through
its fi rst multi-brand market renewal. In Florida, 43 Kash n’ Karry
stores in the key Tampa-St. Petersburg market were converted
into Sweetbay supermarkets. In Belgium, we saw the fi rst two
conversions of Cash Fresh stores to Delhaize banners.
As planned, we managed to keep our operating margin stable at
a strong 4.9% through cost discipline and gross margin support
from lower inventory losses and a better sales mix. This allowed
us to offset the ongoing investments in price competitiveness that
we made at all our operating companies. Our operating profi t
increased by 5.2% at actual and by 5.9% at identical exchange
rates.
This operating performance was supported by our continued
focus on talent development. In 2006, we launched two high-
level programs, the Leadership College and the Skill of the Year
program.
Our higher operating profi t and lower fi nance costs, due to
the redemption of some of our outstanding debt, resulted in
a 12.1% increase in our net profi t from continuing operations.
An impairment charge resulting from the decision to sell our
underperforming Czech business resulted in a -3.6% decrease
of our net profi t (Group share) to EUR 351.9 million. Basic net
earnings per share amounted to EUR 3.71.
Based on our underlying performance, our future plans and our
belief in the Company’s future success, the Board of Directors
will propose to the Ordinary General Meeting in May 2007 to
increase the dividend by 10.0% to EUR 1.32 (or EUR 0.99 net of
25% Belgian withholding tax).
2007 Strategy
In 2007, we will continue our strategy of creating value by
pursuing strong sales growth while maintaining an excellent
operating margin. In order to generate strong top-line growth,
we will continue to focus on our existing sales-building pillars:
concept differentiation, price competitiveness, store and market
renewals and network expansion.
The further differentiation and fi ne-tuning of our commercial
concepts in their respective local markets will remain a key driver
Dear Shareholder,
Dear Shareholder,
LETTER OF
THE CHAIRMAN &
THE CHIEF EXECUTIVE OFFICER