Price promotions and the decision to only partially pass on food price inflation to customers have led to a downturn in second quarter margins for Ahold.

Net sales for second quarter 2008 were EUR 5.8 billion, down 0.8% from the same period last year. At constant exchange rates, net sales increased by 7.3%.

Operating income was EUR 235 million, EUR 39 million lower than in the same period last year. Retail operating income was EUR 247 million, an operating margin of 4.3% compared to 5.1% in the same period last year.

Ahold CEO John Rishton said “We continued to invest in price and gave increased focus to promotions, both of which helped to drive sales and win customers but, as anticipated, impacted margins.

“In Europe, as part of Albert Heijn’s price positioning strategy, food price inflation was only partially passed on to customers during the quarter, and strong promotions including the Euro 2008 Football Championships temporarily impacted margins," he said.

It was a similar scenario at Albert/Hypernova in the Czech Republic and Slovakia. "We also did not pass on all food price inflation to customers this quarter, as we continued the repositioning started a year ago."

In the United States Giant-Carlisle continued to gain market share but margins on other operations were impacted by price investments related to the roll-out of the Value Improvement Program. Improvements are expected later in the year. This program has now gone beyond price repositioning to include marketing and branding such as new logos and store refittings for Stop & Shop and Giant-Landover.

“We are confident we will manage the balance between sales growth and margin and deliver our underlying retail operating margin guidance for 2008 of 4.8-5.3%,” said Rishton.