- The Washington Times - Tuesday, February 25, 2003

AMSTERDAM (AP) Europe was confronted with its own corporate-accounting scandal yesterday when the world's third-biggest food retailer, Ahold, admitted vastly overstating earnings over the past two years.
Ahold's top two executives resigned and several senior U.S. managers were suspended while investigations focused on whether income was booked prematurely at the company's U.S. Foodservice arm, which is headquartered in Columbia, Md. Ahold also owns Giant Food Inc., Stop & Shop and other U.S. supermarket chains.
Its shares plunged 63 percent in Amsterdam trading after the company said it inflated earnings in the last two years by at least $500 million. It will restate earnings for 2001 and delay its 2002 earnings report, pending results of ongoing investigations at its operations in the United States, South America and Europe.
Merrill Lynch estimated the restatement could wipe 10 percent to 30 percent off 2002 per-share earnings.
The news dragged down shares in the European retail-food sector, but analysts said there didn't seem to be an industrywide problem. Delhaize of Belgium sank 5.3 percent and Carrefour and Casino of France fell 0.2 percent and 3.6 percent, respectively.
However, analysts said the disclosure hurt investor confidence in the Netherlands as it called into question the soundness of accounting practices used by a well-known and widely held company.
Shares of financial companies ING Groep and Aegon, who have direct investments in Ahold, fell 7.1 percent and 6.9 percent, respectively. The broader Dutch market fell 5.4 percent.
Standard & Poor's lowered its credit rating for Ahold bonds as prices tumbled on international markets.
Ahold, which uses U.S. and Dutch accounting standards, generates more than half its sales in the United States, where it owns the regional chains Giant-Landover, Giant-Carlisle, Tops, BI-LO and Bruno's, as well as Stop & Shop.
Jamie Miller, a spokesman for Giant Food, based in Landover, declined to comment on how Ahold's overstated earnings would affect its 190 stores in Maryland, Virginia, the District, Delaware and New Jersey. He referred all calls to Ahold's Netherlands headquarters.
One analyst said the company's U.S. operations remain a bright spot.
"The U.S. food retail business is the only thing going well for them," said Tim Attenborough, a food retail analyst at BNP Paribas in London. "Management has denied selling its U.S. assets and that's a good thing to stress."
According to figures released by Ahold in February, the company has 40 million customers in 27 countries and generated sales of $79 billion in 2002. It owns about 9,000 supermarkets on four continents and employs around 450,000 people.
Its shares came under pressure just over a year ago when it became known that the company's profits were smaller when stated under U.S. rather than Dutch accounting rules, primarily due to its treatment of goodwill amortization.
Staff writer Donna De Marco contributed to this report.

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