) to neutral from buy.
Analyst John Kershaw says although the Dutch supermarket chain's third-quarter sales are slightly ahead of his estimate, he say the company commented on a margin squeeze, particularly in the U.S. foodservice business. He forecasted 1.5% operations margins in the U.S. foodservice business, and now believes that may be closer to a break-even position for 2003.
Kershaw says where margins can be built -- and how quickly -- appears to be less certain given the lower base and the lack of clarity regarding the reduction. He struggles to see how Ahold can continue to meet the rolling 12-month interest covenant.
Kershaw cut the 2003 earnings per share estimate to 35 euro cents ($0.41). He says there's too much uncertainty to meaningfully forecast 2004 numbers and support his previous buy stance.