CEO Anders Moberg: "2004 will be a transitional year."

But Ahold's shares rose on the news because its losses reflected the one-off cost of selling supermarkets in Brazil and Asia.

The 405m euro ($486.4m; �269m) net loss met expectations and compares with a profit of 84m euros a year earlier.

Ahold is recovering from an audit scandal and the rise in share price may point to increasing investor optimism.

In 2002, the group found a $1.46bn (�804bn) hole in the accounts of its US subsidiary Foodservice.

Painful adjustment

Ahold found itself heavily in debt as a result of the US scandal and a rapid expansion in the 1990s. It has sold businesses in Brazil and Thailand to help tackle the problem.

"We announced that 2004 will be a year of transition," said Anders Moberg, Ahold president and CEO, adding that exceptional losses from the disposals had "heavily impacted" the first quarter results.

"Apart from these exceptional losses that have no impact on equity or cash, the main operating companies performed in line with our expectations," he said.

Sales fell 11% to 15.4bn euros, due to the strong euro and divestments but discounting these factors, the stores group's sales grew roughly 1.3%, said Ahold.

The euro's strength against the dollar hurt Ahold because nearly three quarters of its revenue comes from the US.

Ahold's shares gained 1% to 6.15 euros on Monday morning.