Faced with a third quarter in which profits declined for the second-straight quarter, reversing a growth trend that lasted almost three decades, Royal Ahold announced yesterday that it will embark on an “aggressive company-wide initiative” that will focus on organic growth as opposed to acquisitions, cost reduction and expense efficiency, and a “portfolio review” that may sell off non-productive and/or non-core businesses in order to generate cash flow and reduce debt.
Cees van der Hoeven, Ahold’s President & CEO, said in a statement, 'Our core businesses delivered good operating results in tough trading conditions. The third-quarter results were, however, significantly impacted by a number of non-operating items such as taxation and financial expenses. In many ways, 2002 has not been our lucky year. We have had several disappointments coming from different directions, most particularly South America. Adding up the impact of the extremely difficult trading conditions, the huge impact of currency devaluations, the severe effect of the default of our former Argentine partner, Velox, the impact on financial expenses and the average tax rate, one can say that South America explains most of it.
“Ahold's performance in almost all key markets is very solid in the current environment. It is therefore extra painful that we have had to announce a second revision to the 2002 outlook. We feel invigorated by the new strategic plan that will focus the company on the growth of its core businesses and lead to significant debt reduction.”
Cees van der Hoeven, Ahold’s President & CEO, said in a statement, 'Our core businesses delivered good operating results in tough trading conditions. The third-quarter results were, however, significantly impacted by a number of non-operating items such as taxation and financial expenses. In many ways, 2002 has not been our lucky year. We have had several disappointments coming from different directions, most particularly South America. Adding up the impact of the extremely difficult trading conditions, the huge impact of currency devaluations, the severe effect of the default of our former Argentine partner, Velox, the impact on financial expenses and the average tax rate, one can say that South America explains most of it.
“Ahold's performance in almost all key markets is very solid in the current environment. It is therefore extra painful that we have had to announce a second revision to the 2002 outlook. We feel invigorated by the new strategic plan that will focus the company on the growth of its core businesses and lead to significant debt reduction.”
- KC's View:
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Two points here.
The timing may be particularly bad in one sense, because if Ahold were not having these sorts of problems it is likely that it would have been a prime contender for Dominick’s. Too bad; that would be an intriguing acquisition.
Second, this apparently is raising questions in the marketplace about whether or not Ahold will maintain its ownership in Peapod, the e-grocery company. In our opinion, it would be a shame if Ahold got out of the Peapod business. It may not yet be as productive as the company would like, but online services will be a core offering for every major retailer in the not-too-distant future.
