Ahold Delhaize (ADRNY) posted modestly stronger-than-expected fourth quarter earnings Wednesday and its CEO forecast a potential return to an inflationary environment for food retailers later this year.
Ahold, which has U.S. brands that include Hannaford, Food Lion and Stop & Shop, said underlying operating income, on a 'pro forma' basis, fell 3.9% to €608 million ($641 million) a figure that was marginally higher than the €605 million tally forecasts by Thomson Reuters. Sales for the three months ending in December came in at €15.119 billion, the company said, after earlier this year indicating that fourth quarter revenues had risen 2.8% on a pro forma basis.
The group also said it was increasing its dividend by 9.6% to €0.57 per share and reiterated its target for 2017 free cash flow of €1.6 billion.
Ahold shares gained nearly 4% by 11:00 GMT in Amsterdam trading, changing hands at a three-month high €20.83 each.
"2016 was not only a year where we brought together two strong food retailers," said CEO Dick Boer in a statement. "It was also a year in which our great local brands drove solid performance, serving our customers both in stores and online."
He later told CNBC Europe television that Ahold had been able to offset a deflationary environment with volume growth but said he thinks the industry "we will come back to an inflaionary, or at least neutral, environment later this year."
He was also confident that the group would see-off new discount grocery groups in the U.S. market, including Alidi and Lidl: "We have a lot of comp in the US, that is true, but we have great locations and our real estate is state-of-the-art in the northeast and we are priced correctly, so we are able to sustain new entrants."