* EBIT, net profit ahead of average forecasts
* Retail operating margin 4.9 percent
* Shares up 4.3 percent to three-week high
(Adds CEO, analyst comments, updates shares)
By Reed Stevenson
AMSTERDAM, Aug 20 (Reuters) - Dutch supermarket group Ahold reported second-quarter profit above forecasts on Thursday, as it increased market share and clamped down on costs, convincing investors of its operational strength. Ahold adopted an extensive store revamp in 2006 ahead of competitors and before the economic downturn, which has been luring shoppers to its stores in Europe and the U.S., where it competes against heavyweights such as Wal-Mart Stores Inc and Kroger.
Its shares rose over 5 percent after the Amsterdam-based company said second-quarter earnings before interest and taxes (EBIT) rose to 295 million euros ($416 million) from 235 million a year ago, beating analysts' forecast for 276 million. Ahold, which owns the Netherlands' biggest supermarket chain Albert Heijn but makes just over half of its sales in the United States, said it was able to increase profitability at the same time as it took market share away from competitors, particularly for its U.S. franchises Stop & Shop and Giant-Landover.
"In a recession the strong will get relatively stronger and the weak will get relatively weaker, and we are one of the strong," chief executive John Rishton told reporters. WINNING SHARE
Ahold and rivals such as Safeway Inc have been cutting prices to deal with the recession on both sides of the Atlantic.
But it has been winning market share as other retailers such as Germany's Metro reported shrinking margins and revised down forecasts for the second half of the year.
Rishton said Ahold would "jump on any opportunities" if competitors put any of their stores up for sale, but told Reuters that cash would deployed both for compensating shareholders and acquisitions, as in the past.
He also added that Ahold was on track to deliver its goal of reducing operating costs by 500 million euros by the end of this year. Rishton declined to forecast retail margins due to market uncertainty, as he has done since the recession set in.
"Ahold's strategy and execution are best in class," said SNS Securities analyst Richard Withagen. "It's definitely a buy."
"But they're also noting that the environment is getting increasingly competitive," he added.
Shares in Ahold, which are up nearly 30 percent from a two-year low set in late 2008, were up 4.3 percent at 8.49 euros at 0924 GMT, having touched 8.58 euros earlier, while the DJ Stoxx European retail index was up 1.5 percent.
Ahold is trading at 11 times projected 2009 earnings, just below the index price earnings ratio of 12, and on par with European rivals Tesco and Casino.
COMPETING FOR CUSTOMERS
Rishton said competition remained fierce, but not sustained: "what we're seeing, as you would expect, is increasing promotional activity from many of our competitors, tactical promotions that are quite intense for a short period."
Sales for the second quarter, reported in July, rose 11.5 percent.
Petercam analyst Fernand de Boer, who raised his recommendation on the shares to "buy" from "add" on the back of the results, said "the strong operational performance is supported by a very strong financial position".
For the second quarter, net income came in at 195 million euros, above the projected 184 million euros.
Several analysts noted the improved profitability at U.S. stores Stop & Shop and Giant-Landover, where the operating margin stood at 4.9 percent compared with 3.1 percent a year earlier. At Albert Heijn stores, where Ahold is the market leader in the Netherlands, the operating margin was 6.7 percent.
Overall, Ahold said it had a retail operating margin of 4.8 percent in the latest quarter, compared with its stated longer-term target of 5 percent.
Asked whether that target would be achieved, Rishton said the retail environment remained too volatile to give such guidance, but added he was comfortable with margin trends. (Editing by Jon Loades-Carter/Will Waterman)