Grocer's 1st-quarter earnings decline


Giant Food LLC, the region's largest grocer, continued to feel the impact of its shaky merger with Stop & Shop Supermarket Co. as its first-quarter earnings fell and a regional survey reported that the company lost market share.

Operating income of Giant and Stop & Shop, which is reported as one unit, fell by 2.8 percent in the first quarter, according to Royal Ahold NV, the Dutch parent company of the two grocers. Higher prices on perishable items affected the combined gross margins of the two chains.

Combined net sales at Giant and Stop & Shop increased 2.9 percent in the first quarter. Stop & Shop outperformed Giant in the quarter as its comparable sales rose 0.2 percent while Giant's fell 3.0 percent.

Last year, Ahold moved Landover-based Giant under the administration of Quincy, Mass.-based Stop & Shop to gain efficiencies and cut costs. Ahold said yesterday that weak sales and higher operating costs offset savings from the integration.

Meanwhile, Food World, a supermarket trade publication in Columbia, in an annual survey of area supermarkets released in its June issue, reported that Giant's market share in the Baltimore area dipped more than 2 percent. With 46 stores and sales of $1.4 billion, Giant captured 31.57 percent of the market's grocery spending. Last year, it earned $1.5 billion in sales and captured 33.65 percent of the market.

Giant remains the leading grocer in the Baltimore-Washington region, far outpacing Safeway, the No. 2 grocer, which had 15.02 percent of the market. But the earnings and market share numbers are the latest signs that Giant has suffered some from corporate overhaul in recent years.

Customers complained about poor service and out-of-stock items - problems Giant acknowledged and said it has worked to improve. The company announced a major restructuring plan last month that would eliminate 500 jobs, close or sell its manufacturing operations and sell its corporate headquarters campus in Landover.

"2004 was sort of a nadir of many of the Giant issues which have challenged the company in recent years," said Jeff Metzger, publisher of Food World.

Metzger said that Giant isn't in danger of Safeway catching it, especially with little room for expansion in the area. But he said it would take a while for Giant to recover.

"It's going to take some time yet," Metzger said. "I think the new management team is aware of the issues and what they need to do, but this is not a six-month turnaround."

Ahold also said yesterday that the turnaround of Columbia-based U.S. Foodservice is on track. Faulty accounting at the food distributor triggered a scandal that caused Ahold to overhaul top management and restate earnings.

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