- The Washington Times - Monday, November 6, 2006

1:39 p.m.

The Dutch company that owns Giant Food supermarkets said today that it plans to sell Columbia, Md., distributor U.S. Foodservice in its strategy to turn around the retailer’s fledgling sales.

Royal Ahold NV plans to retain Giant Food Inc., the Landover grocery chain, but lower prices and rely less on promotions.

The sale of U.S. Foodservice, which sells bulk food and products to cafeterias, hotels and restaurants, was expected. Royal Ahold’s U.S. operations have struggled under competition from discount retailers such as Wal-Mart Stores Inc. as well as a crippling accounting scandal at U.S. Foodservice in 2003. In August, two major shareholders urged the company to sell its U.S. businesses and focus solely on its European chains.

Ahold President and Chief Executive Officer Anders Moberg said there has been interest in U.S. Foodservice,. About 450 people work at U.S. Foodservice’s headquarters in Columbia.

Ahold said it plans to return $2.5 billion to shareholders and settle about $2.5 billion in debt with the sale of U.S. Foodservice and the Tops supermarket chain, which has stores in New York state. No timeline was announced.

Ahold also plans to increase retail sales by 5 percent, but Mr. Moberg declined to reveal a timeline.

“It is now time for us to focus our efforts on strengthening our retail competitive position, particularly in the United States,” Mr. Moberg said. “We will apply our consumer insight much more actively to improve our product, service and price offering in order to increase customer loyalty.”

The company plans to lower prices and rely less on promotions in its U.S. stores, a move that has turned around the grocery chain Albert Heijn in the Netherlands, said Ton van Ooijen, an analyst with Kepler Equities in the Netherlands. The strategy was put in place in late 2003, and last quarter, sales at the chain rose 10 percent.

“I’ve never seen that before,” he said. “It was very impressive.”

Ahold plans to reduce operating costs by $636 million over three years and cut administrative costs in half over the next two years.

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