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Delhaize-06/12- BUY

Delhaize decided to push the refurbishment pedal at a time when the trading environment is volatile. Stimulus, budget and fiscal uncertainty weigh on the consumer behaviour. The market is extrapolating the current negative environment too far into the future. Past cycles have proven that the refurbishment phases of Food Lion will create a sound basis for LfL growth and operational margin leverage. Delhaize will be in pole position if and when the consumer sentiment normalises in the US. The job and the housing markets have already stabilised and are leading indicators for consumer confidence. The deleveraging of consumer debt has shifted budgets to club formulas and discounters. This trend is likely to bottom out over the next couple of quarters. I believe that also the competitive risk from Walmart is exaggerated. The WMT momentum is mainly driven by macro factors and the downsizing of struggling chains like Supervalu compensate for the WMT expansion. For decades, the US market has been a market on the edge of oversupply and Delhaize has done well in this environment. Delhaize is also trading at a deep discount to its peers.

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