Ahold profit up 46 , but says environment remains challenging

Dutch retailer Koninklijke Ahold NV (AH.AE) Thursday posted a 46% rise in first quarter net profit, mainly due to changes in its estimates for provisions for its former subsidies, but said its markets continue to be challenging.

"Our volumes and market share improved in both the U.S. and the Netherlands, but markets remain challenging with consumers focused on value and high levels of promotional activity," Chief Executive John Rishton said.

The retailer, which runs stores in the Netherlands, Slovakia and the Czech Republic and in the U.S., said first quarter net profit rose to EUR274 million from EUR188 million a year earlier, ahead of analysts' expectations of a net profit of EUR270 million.

Net profit in the first quarter 2009 was hit by a EUR66 million provision related to former US subsidiaries Bi-Lo and Bruno's.

First quarter revenue rose 1% to EUR8.73 billion from EUR8.65 billion a year earlier, boosted by the acquisition of 25 Ukrop stores in the U.S, but damped by a weaker dollar. Excluding the currency effect, sales were up 3.4%.

In the U.S., where Ahold generates around 60% of its sales, operational income dropped 6% to $295 million, as the retail environment remained competitive. Total sales in the U.S. were up 4.2% to $7.1 billion. Sales excluding fuel from stores open more than a year dropped 0.1%, but still outperforming US peers. Wal-Mart Stores Inc (WMT) reported a 1.4% drop in first quarter sales earlier in May while Safeway Inc. (SWY) reported a 3.1% drop.

Ahold's Dutch operations posted a 13% increase in operating income and a 2.8% rise in same-store sales while the underlying operating margin rose to 6.9%, from 6.2% in the first quarter of last year and 6.7% in the fourth quarter of 2009.

Ahold's operations in the Czech Republic and Slovakia reported a 0.2% drop in net sales, due to store closures. Operating income was nil compared to a loss of EUR14 million last year.