Sales at Giant Food Jump During First Quarter of '09

Sales at Giant Food and Stop & Shop supermarkets shot up in the first quarter, according to financial results released yesterday by Dutch parent company Royal Ahold, their strongest performance in about a decade.

At Giant stores that have been open at least a year -- a key measure of a retailer's health -- sales rose 3.6 percent, despite lower pharmacy sales. At Stop & Shop, sales jumped 4.8 percent. Operating income for the two chains increased to $242 million, up 20 percent from the quarter last year.

J.P. Morgan analyst Jaime Vazquez said that Giant and Stop & Shop's performance was notable given the decline in food prices, which is squeezing grocers' margins. In the past two years, Ahold has aggressively worked to reinvigorate the chains, which had been losing market share to discounters and high-end grocers.

Giant remains the largest grocer in the Washington area both in sales and number of stores. According to the trade publication Food World, Giant rings up about $3.3 billion in sales and has 23.2 percent of market share, a measure that includes convenience stores. Safeway follows with $2.6 billion in sales and 18.3 percent of the market. And the recession has forced customers away from more expensive chains such as Whole Foods.

Giant has lowered prices on products ranging from paper towels to produce, and last year Ahold unveiled a new logo for both chains. Ahold also has been remodeling its aging stores, its biggest investment in the chains.

"It seems that Ahold's self-help in the U.S. is offsetting the general trend," Vazquez wrote.

The performance of Ahold's U.S. stores helped offset difficulties in its European divisions, which have been dragged down by currency changes and a weakened economy. Total sales for Ahold were up 15 percent to $12.1 billion compared with last year, but earnings fell nearly 25 percent to $273 million. Ahold attributed the decline to higher taxes and charges related to lease guarantees.