Delhaize to Cut 5,000 Jobs in U.S., Europe as It Closes Stores

January 11, 2012, 11:36 PM EST

By Vinicy Chan

Jan. 12 (Bloomberg) -- Delhaize Group SA, the owner of Food Lion supermarkets, plans to cut about 5,000 positions and expects a 2.4 percent drop in revenue as it closes stores in the U.S. and Europe.

Costs related to the closures will hurt earnings by about 205 million euros starting in the first quarter, the Brussels- based company said in a statement today. Closing 146 outlets and converting 64 others will cut the number of shops by about 4.3 percent and initially lower revenue by about 500 million euros ($636 million), or 2.4 percent, Delhaize said.

“We are disappointed in the fourth-quarter revenues in the U.S. and Belgium,” Chief Executive Officer Pierre-Olivier Beckers said in the statement. “Consumers continued to feel pressured in the fourth quarter due to the macro-economic environment and this led to a reduction in spending. We also encountered an increase in competitive activity.”

The store closures and jobs cuts at Delhaize come as consumers continue to be hurt by high levels of joblessness in the U.S. and Europe. The U.S. unemployment rate, which was 8.5 percent in December, has curbed spending in the world’s largest economy.

Delhaize lost 17 percent of market value in the past year compared with a 13 percent decline for the Stoxx Europe 600 Index. The stock rose 2.7 percent to 46.85 euros in Brussels yesterday.

Delhaize expects to record an impairment charge of about 120 million euros in the fourth quarter of 2011, which is related solely to the U.S. operations.

The store closures and conversions will have an “annual positive effect” on operating profit of 35 million euros to 40 million euros after completion, said Delhaize.

Beckers said Delhaize will improve its “price competitiveness” this year.

The food retailer will close 113 Food Lion, seven Bloom and six Bottom Dollar Food locations in the U.S., it said. The remaining 42 Bloom shops as well as 22 Bottom Dollar Food stores will be turned into Food Lion outlets.

Twenty stores in southeastern Europe will also be closed.

--Editors: Anjali Cordeiro, Frank Longid

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net