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Sweetbay parent overhauls Food Lion with cost cutting

Delhaize Group, the Belgian owners of Sweetbay Supermarket and other chains, will close 126 U.S. stores, eliminate 4,900 jobs and pull out of several markets across the Southeast next month.

The 103 Sweetbay stores will be spared, but the move will reshape Delhaize's Food Lion unit into a 1,127-store operation focused more on price across 10 states. In the process Food Lion will pull out of Florida, closing 25 stores as far south as Alachua County and halve its presence in Tennessee and Georgia. A distribution center in Clinton, Tenn., will be closed.

It's another example of how Walmart and dollar stores, and the spread of limited-assortment grocers like Aldi and Save-A-Lot have sent supermarkets scurrying for new strategies.

Delhaize does not break out the performance of its U.S. units. But in contrast to Sweetbay, which uses higher-quality produce and meats to better compete at a level with Publix, Food Lion is more of a budget grocer operating from small, traditional supermarkets that go head-to-head with the discounters.

The latest changes have been accelerated by a threadbare economic recovery that has left U.S. grocers' profits squeezed by rising food prices and shoppers' inability or unwillingness to spend more.

Indeed, Delhaize sales in stores open more than a year declined 0.4 percent in the quarter ended Dec. 30. Worse, the company's 1 percent overall sales gain was less than half the increase in wholesale food prices.

Driving the decision to close marginally performing stores was the chance to cut $60 million in annual expenses.

"This will enable us to focus on our successful repositioning of Food Lion," said Ron Hodge, CEO of Delhaize America, which runs 1,650 stores. "The most successful markets are where we have strong store density or high market share."

The strategy goes beyond closing stores. About 700 Food Lions are being refit with more focus on price and perishables. Food Lion will give up on Bloom, a decadelong experiment in bigger, more upscale stores with a punched-up selection of perishables. All 42 remaining Bloom stores will be closed or converted to Food Lions.

Bottom Dollar Food, a limited-assortment chain of 22 drugstore-sized stores that sells mostly national brands in the Middle Atlantic states, will be expanded and open in Pittsburgh and northeast Ohio.

"We confirm our plans to add hundreds of Bottom Dollar stores in the next five years," the company said in a statement.

Delhaize's stock price fell 10 percent to close at $53.72 Thursday, down $5.88.

Mark Albright can be reached at [email protected] or (727) 893-8252.

Sweetbay parent overhauls Food Lion with cost cutting 01/12/12 [Last modified: Friday, January 20, 2012 5:36pm]
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