Delhaize Group, the owner of the Food Lion supermarket chain in the U.S., cut its annual profit forecast because of a weakening consumer climate.

Net income for 2008 will increase by 15 percent to 20 percent compared with a previous forecast for growth of 25 percent to 30 percent, the Belgian retailer said in a statement. Delhaize fell as much as 16 percent in Brussels trading, the steepest drop in almost six years.
Consumers in the U.S. and Europe are turning toward cheaper merchandise and buying fewer items per visit as higher oil and food prices sap disposable incomes, Delhaize said today. The retailer has added private label products, lowered prices and offered in-store promotions in an effort to lure customers.
``I can't say we are really surprised because we know things are worsening,'' said Claudie Casimir, an analyst at Natixis Securities in Paris, who has an ``add'' rating on the stock.
``It's not that the strategy is wrong, it's just they are more high-end in terms of prices, in difficult market conditions.'' Delhaize fell as much as 6.49 euros to 33.52 euros in Brussels, the steepest drop since September 2002. The shares have fallen 40 percent this year, the second-biggest drop among the nine members of the Bloomberg Europe Food Retailers Index. They traded at 34.01 euros as of 09:15 A.M. local time.
Second-quarter operating profit fell 22 percent to 194 million euros ($308 million), Delhaize said today. The decline was 12 percent expressed at identical exchange rates, it said. Earnings will be ``entirely weighted towards the second half,'' Delhaize said, citing costs of adding private label goods in the U.S., Food Lion renovation work and store openings.
The retailer said annual sales growth will be between 3 percent and 4.5 percent, less than its previous forecast of 4 percent to 5.5 percent. Revenue at U.S. stores open a year or more will grow 1.5 percent to 2.5 percent in 2008, compared with the company's previous goal of 2.5 percent to 3.5 percent.
``The current environment requires us to address short-term market challenges,'' Chief Executive Officer Pierre-Olivier Beckers said in the statement. ``All of our operating companies continue to build their private label offering and to increase their price competitiveness and promotional activity.''