Royal Ahold NV, the Dutch owner of the Stop & Shop and other grocery chains, reported a sharp fall in second quarter earnings Thursday after selling operations in the same period a year ago.
Operationally, the company suffered from shrinking margins on both sides of the Atlantic as it spent more on advertising and special bargains to attract increasingly price-sensitive shoppers.
Net profit was euro338 million ($497 million), down from euro2.23 billion. Ahold booked gains of euro2.06 billion last year, mostly from selling its bulk food arm, U.S. Foodservice.
Net sales were down 0.8 percent to euro5.78 billion ($8.50 billion), which Ahold said would have been a 7.3 percent rise stripping out the impact of the weak dollar.
Sales grew more than 10 percent in Europe and less than 5 percent in the U.S., where it owns the Stop & Shop and Giant chains.
Operating earnings fell 14 percent to euro235 million ($345 million).
"We continued to invest in (offering customers better) price and gave increased focus to promotions, both of which helped drive sales and win customers but, as anticipated, impacted margins," said Chief Executive John Rishton in a statement.
Shares fell 4 percent to euro8.34 ($12.25) in Amsterdam.
"The underlying picture is slightly weaker than expected," wrote analysts for SNS Securities in a note on earnings.
However, they said "sales trends form a strong ... foundation for solid growth in operating profit in the second half." The bank rates Ahold shares a "buy."
