Delhaize America has closed 126 under performing stores primarily affecting its Food Lion, Bottom Dollar Food and Bloom banners. The Salisbury, NC company will also convert 64 Bloom and Bottom Dollar stores in Maryland, Virginia and North Carolina to Food Lion bannered stores (while also closing seven Bloom and six Bottom Dollar stores – see entire store closing and conversion list on page 25).
In fact, the big Belgian owned retailer will eliminate its semi-upscale Bloom banner entirely. Delhaize America will also shutter a distribution center in Clinton, TN and convert one Food Lion unit in Lake City, FL to its Harvey’s banner, meaning that there will be no more Food Lion locations remaining in the Sunshine State (however, Sweetbay, Harvey’s and Reid’s units will still operate in Florida).
According to Delhaize America CEO Ron Hodge, the closings and conversions are part of the company’s overall brand repositioning and targeted growth strategy for its Bottom Dollar format. “These actions will continue to solidify our U.S. operations and enable our company to focus on our successful brand strategy repositioning at Food Lion and the expansion of Bottom Dollar Food in new markets,” said Hodge. “While these were difficult decisions given the impact on our associates, customers and communities, we believe these actions will enable us to better serve our customers in our markets with high density, while positioning the company for future growth.”
The announcement of the store closings and conversions came on January 11. However, it was only six weeks earlier that the big international merchant unveiled a new growth initiative (“New Game Plan”) which called for 450 new stores (worldwide) and an annual revenue growth rate of 5-7 percent. The company added that it had also achieved about 60 percent of its goal to save 500 million Euros ($646 million) by the end of 2012 while also increasing productivity. Part of the those dollar and productivity enhancements are expected to generated by implementing a controversial centralized merchandising program
As a result of these the store closings, approximately 4,900 associates will be displaced. The company said it will provide severance to eligible associates, and will work with government officials to assist with transition support. Associates are also encouraged to apply for open positions within the company. Most associates working at converted stores will continue to work at these locations.
Delhaize America’s two banner presidents – Cathy Green Burns at Food Lion and Meg Ham at Bottom Dollar Food – commented on the closings and conversions.
“Food Lion is focused on repositioning our business for future growth,” said Green Burns. “By closing underperforming stores, we will continue to position Food Lion for success, especially in light of our brand strategy results. We are very pleased with the reaction from our customers on the implementation of our new brand strategy work, which includes being recognized as a price leader, making our stores easier to shop, offering the greatest value in private brands and providing fresh produce. However, we also determined the most successful markets for these investments are areas where we have strong store density or high market share. As we move forward with implementing our strategy this year, Food Lion will launch its next market this quarter and expects to be substantially complete by year-end. We look forward to accelerating the Food Lion strategy and bringing the strategy to life in an additional 600 to 700 stores.”
Meg Ham stated: “Bottom Dollar Food is a strong, emerging banner that is continuing to grow and be successful in our new markets. Customers have been very receptive to our discount grocer model, which includes a smaller format, the most popular national brands, a wide selection of private brand products, and fresh produce and quality meats at unbelievably low prices. We look forward to continuing to grow and win in our new markets.”
According to the company, the Bottom Dollar stores being closed or converted are the banner’s larger format stores. By making these changes, Bottom Dollar will now operate its business utilizing smaller format stores of about 18,000 square feet, which has proved to be a more successful format for the banner, a spokesperson for Delhaize America stated. Bottom Dollar will open 14 stores in Pittsburgh and Youngstown, OH, by the end of the first quarter, and expects to open another 10 to 15 stores by year-end in its new markets, which include the Delaware and Lehigh Valley areas.
In addition, the company said it plans to continue aggressive growth of the banner by adding several hundred Bottom Dollar stores in the next five years. After the conversions and store closings are complete, and the additional stores open this quarter, Bottom Dollar Food will operate 43 stores in Pennsylvania, New Jersey and Ohio.
It was only about five years ago that Delhaize America, noting flat sales and diversifying competition in the Washington DC market, converted 54 Food Lion stores to Bloom (40 stores) and Bottom Dollar Food units (14 stores). Now, the wheel has spun another 360 degrees and Bloom will cease to exist altogether and Food Lion will return as the retailer’s primary banner in the DC area.
Delhaize will also close 20 stores in Southeastern Europe. The moves will reduce U.S. revenues by about $650 million.
On January 12, the Delhaize Group released its fourth quarter and year end sales (the full earnings report will be announced on March 8). At that time, president and CEO Pierre-Olivier Beckers said, “After a thorough review of our store portfolio, we have decided to close or convert a number of stores in the U.S. and in Southeastern Europe during the first quarter of 2012. This decision is in line with our ‘New Game Plan’ which is aimed at accelerating profitable growth. For a retailer, it is never an easy decision to close stores as we are fully aware of the impact on our associates, our customers and the communities we serve. Having said that, we feel these decisions are in keeping with our responsibility to our shareholders to deploy resources where they will achieve the highest return. We fully expect these actions to be value enhancing in 2012. We are consistently executing our New Game Plan strategy and continue to invest in the many initiatives that are part of it such as the successful brand strategy work at Food Lion, the expansion of Bottom Dollar Food in its newer markets and our growth plans for Southeastern Europe. Funding for these will continue to come largely from the EUR 500 million gross annual cost savings target that we expect to exceed by the end of 2012. We confirm our target to achieve 5 to 7 percent revenue growth annually by 2014 and the ambitious plans to open 450 new stores in our high growth operations over the next 3 years that we communicated during the recent analyst field trip.”
In its fourth quarter which ended on December 31, Delhaize reported overall sales in the U.S. were up 1 percent to $4.77 billion. Comparable store revenues at its U.S. units, however, were negative 0.4 percent.
Delhaize said it noted a deterioration of the volume trends starting towards the end of the third quarter and continuing in the fourth quarter. Inflation stayed at a high level and together with low consumer confidence has resulted in increased competitive activity and lower consumer spending.