Peak price dates back to 1999
Delhaize’s best period on the Brussels stock exchange dates back to 18 February 1999, when its share reached 3,699 Belgian francs (which is 91.7 euro). Back then, strong growth under CEO Pierre-Olivier Beckers’s leadership was the reason for the excellent performance.
Several months later, Delhaize stole Hannaford Brothers away right from under Ahold’s nose and that significantly increased Delhaize’s American market share instantly. Barely 3 years later however, its shares dropped down to 16 euro. The Hannaford purchase had happened at the peak of the market and was largely financed by additional debt.
American operations now give company boost
Remarkably, Delhaize’s American operations are now also responsible for its current strong position: 61 % of Delhaize’s turnover comes from the United States and the stronger dollar helps generate additional income when exchanged into euro. The American dollar gained 12 % on the European currency over the past year and that surge will not stop anytime soon, it seems.
Delhaize should also be able to profit from the increased economic growth in the United States, as 2014’s second quarter outpaced the same period in the previous year by 4.6 %. 2014’s third quarter even reached a 5 % growth, more than anticipated. This economic growth should give consumers additional funds, which can then be spent in stores.
Contrary to its American operations, Delhaize Belgium, which still represents nearly 25 % of total turnover, is still in a restructuring phase. It will shut down onerous stores it owns, while it also aims to reel in wages.
Higher evaluation than Colruyt
That is why Bank of America Merrill Lynch and Barclays have given investors the advice to buy Delhaize shares and they estimate the course to reach 64 euro. One day after the advice had been given, the share rose 4.73 % to 61.75 euro, while other larger shares have lost nearly .5 %.
The stock exchange currently values Delhaize at 6.4 billion euro, which means it pips its competitor Colruyt, valued at 6 billion euro.
