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Shares of Belgian international food retailer Delhaize GroupInc. (DEG - Snapshot Report) reached a new 52-week high of $73.89 per share on Mar 7 after it announced a stock split on the same day.

Shares of Delhaize Group eventually closed at $73.72, representing a 38.5% year-to-date increase.

Growth Driver

Delhaize Groupannounced a 4 for 1 split of the Delhaize Group American Depositary Shares (ADS) traded on the New York Stock Exchange effective Apr 7, 2014. The exchange ratio will change from the current one ADS for one ordinary share to four ADS for one ordinary share. However, there will be no change in the company’s underlying ordinary shares.

As a result of the ratio change, depository shareholders will receive three additional ADS for every ADS held as of Apr 1, 2014. However, depository shares issued prior to the effective date do not reflect the new ADS-to-Share ratio.

This is of particular interest to investors as even though the company’s market capitalization remains same, it will increase the ownership of existing shareholders in the company. New investors will also be attracted as they can own shares at lower cost. Moreover, the stock split will help the company maintain its liquidity as there is no cash outflow unlike for dividend hikes or share buybacks.

Moreover, on Feb 25, 2014, Delhaize Group received an approval from the Federal Trade Commission to proceed with the acquisition deal with Bi-Lo Holdings, LLC. Per the deal, Bi-Lo Holdings will acquire all the stores in the Sweetbay, Harveys and Reid’s supermarket chains from Delhaize. Thereafter Bi-Lo Holdings will divest 12 Delhaize America stores in the states of Florida, Georgia, and South Carolina.

Also, Delhaize Group will retain two stores under these brands and convert them to the Food Lion banner. The sellout is a part of Delhaize’s strategy to simplify the company’s U.S. operations to enable it to better focus on its core businesses in the region.  

Other Stocks to Consider

Delhaize Group currently sports a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the retail sector are Kroger Company (KR - Analyst Report), Post Holdings Inc. (POST - Snapshot Report) and Spartan Stores Inc. (SPTN - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

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