As consumer confidence has sunk amid worries over the job market, the stock market and potential war in Iraq, American shoppers are spending less not only at malls and discount stores, but at the supermarket, too.

With shoppers pulling away from higher-priced items, sales growth has slowed at Royal Ahold NV, the biggest food retailer on the East Coast and the owner of Landover-based Giant Food Inc.

At Ahold's six U.S. grocery chains - which account for more than half of its worldwide sales - sales dipped 0.2 percent during the third quarter, the company reported late last month.

"When the economy slows down, people trade down and buy cheaper products," said Mark Wasilewski, food and drug retailing director for ABN AMRO Bank NV in London. "If they normally have beef, they go to pork instead. They're not buying less, but they're buying cheaper products within the store."

Consumers are also doing more of their grocery shopping at discounters such as Wal-Mart Stores Inc., the nation's biggest retailer, which has taken a huge bite out of grocery chains' customer base with its grocery store supercenters.

Ahold rivals Safeway Inc. and Kroger Co. have been forced to cut prices to try to keep up with Wal-Mart. Sales have dropped in recent months at Supervalu Inc., which owns Metro Food Markets, and Delhaize Group's Food Lion. In September, Kroger, the largest U.S. supermarket chain, cut its annual earnings growth forecast to between 5 percent and 7 percent.

"It's a tough old environment out there for the supermarkets," said Timothy Attenborough, an analyst at BNP Paribas in London. "There's always Wal-Mart looking over everyone's shoulder, and it's not going to get any easier."

But analysts say Netherlands-based Ahold may be one of the better-positioned food retailers to weather a slowdown. During 12 of the past 15 quarters, Ahold has beaten the average same-store sales of rivals Safeway, Albertsons Inc., Kroger and Delhaize.

Late last month, Ahold reported that third-quarter sales worldwide rose 5.8 percent to $16 billion, compared with the corresponding period last year, but a smaller gain than increases of 22 percent and 7.3 percent in the first and second quarters. Excluding recent acquisitions, sales rose just 1.5 percent. Ahold expects to announce earnings Nov. 26. Until then, said spokeswoman Annemiek Louwers, the company will not comment on its sales.

Areas of weakness

Analysts have focused on two areas of weakness - the U.S. supermarket chains, which include Giant as well as Stop & Shop, Giant of Carlisle, Tops, BI-LO and Bruno's; and U.S. Foodservice.

The Columbia-based company distributes food and other products to restaurants, hotels and cafeterias. Excluding last year's acquisition of Alliant Foodservice for $2.2 billion, U.S. Foodservice posted a 6.1 percent drop in sales.

Ahold's same-store retail sales have suffered because of weakness in the BI-LO chain, which has been hurt by competition from Wal-Mart and rising unemployment causing shoppers to "trade down" to lower-priced grocery items, one analyst said.

"BI-LO had a horrid year last year, though the other businesses have held up reasonably well," in part because Northeast chains such as Giant and Stop and Shop are dominant players in their markets without as much direct competition from Wal-Mart, said David Shriver, managing director for food retailing equities at Credit Suisse First Boston in London.

He expects Giant's sales to have been hurt by the sniper attacks in suburban Maryland and Virginia and in Washington, where Giant has a stronghold and shoppers were likely scared away during three weeks of random shootings. The effects of those weeks should show up in Ahold's fourth-quarter sales, Shriver said.

Some analysts said the sales slowdown at Ahold's U.S. retail stores is not likely to cut into the company's third-quarter profit, partly because Ahold has likely anticipated the slower sales.

"Profit growth has not been entirely sales-dependent," Wasilewski said. "A lot of the profit comes from internal efficiency gains, merging the back offices" of chains that Ahold has acquired over the years.

"Their sales hold up better than their main competitors', so their performance is relatively good in terms of sales and more so in terms of profitability," Wasilewski said.

U.S. drop a surprise

While analysts said the third-quarter sales numbers at the U.S. supermarkets came as little surprise, some were caught off guard by the 6.1 percent drop in sales at U.S. Foodservice. Including the $2.2 billion acquisition of Alliant, sales increased by 43.3 percent to $4 billion.

"Everyone knows there isn't strong growth in Ahold," as far as its same-store sales, said one analyst who follows the company. But he said, "the food service numbers ... were a bolt from the blue."

Rival Sysco Corp., the nation's largest food service company, reported a 10 percent increase in sales for its third quarter.

Analysts said Ahold has been hurt by the complicated integration of Alliant into its food service operation.

Ahold lost some customers when it began renegotiating prices on some unprofitable Alliant contracts, analysts said. Other business was lost as Ahold put its management resources into combining the two companies.

Part of the process involved integrating distribution centers and moving customers from one facility to another.

"You risk losing customers because they don't like the change," Wasilewski said.

At this point, Ahold is about 90 percent finished with the integration. So the focus will begin to shift to building up business, analysts said.

Others said, despite the weak retail sales numbers, they had a positive outlook for Ahold's food retailing.

"I'm not worried about the food retailing business in the U.S.," Wasilewski said. "When the economy [improves], then so, too, will food retailing."