By Maarten van Tartwijk
Supermarket operator Delhaize Group (>> Ets Delhaize Freres et cie le Lion S.A) said Thursday that its operations in Greece have recorded a sharp jump in sales in recent weeks, as cash-strapped consumers rushed to buy groceries in response to the country's economic and political turmoil.
Delhaize said it saw a notable increase in sales in the days after the Greek government called a referendum June 26 on whether it should accept tough austerity measures in return for fresh financial aid.
"Consumers started to stock up due to the announcement of the referendum, anticipating on the economic uncertainties," Chief Executive Frans Muller said after Delhaize reported second-quarter earnings. "We saw a significant uplift in sales until the new agreement [between Greece and its creditors] was signed."
Brussels-based Delhaize, which last month agreed a $29 billion merger with its Netherlands' rival Royal Ahold NV [AH.AE], has a sizable presence in Greece through its Alfa-Beta supermarket chains. The retailer is one of the few multinationals that has ramped up investments in the country over recent years: by the end of June, it owned 333 stores, up from 223 in 2010 when Greece received its first package of financial aid.
Without giving specific figures, Mr. Muller said the Greek business managed to grow revenue and market share in the second quarter and that "profitability grew even faster," in part due to promotions, new store openings and better terms with suppliers.
However analysts say Delhaize's exposure to Greece poses a potential risk. The country accounts for 10% of the group's operating profit and a Greek exit from the eurozone could trigger 180 million euros ($198 million) in asset write-downs, according to brokerage firm Kepler Cheuvreux.
Mr. Muller, who was speaking to analysts via a conference call, said the outlook for the remainder of the year is uncertain due to capital controls that set a limit on cash withdrawals and money transfers, complicating payments to suppliers outside Greece.
The implementation of new austerity measures, including a higher sales tax on certain food categories, could also have a negative impact, he said.
"We've been relatively successful to run our operations as normal as possible, despite the capital controls in place," Mr. Muller told analysts. "But we don't have visibility that we can continue our performance of the first half."
Still, Mr. Muller said there is reason for optimism if the Greek government moves ahead with planned economic overhauls. "It will be easier [for stores] to open on Sundays, and it will be easier to run discounts throughout the year and sell drugs and medicines in supermarkets," he said. "We believe there will be opportunities for the food retail sector."
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