U.S. Sales Pace Ahold Q1 Growth

AMSTERDAM Led by a strong performance by its U.S. banners, Ahold posted a 6.2% increase in net income during the first quarter, the company here said last week. In the U.S., where the company operates the Stop & Shop, Giant-Landover and Giant Carlisle chains, identical sales improved 3.2% excluding fuel, and total sales increased 7.4% to $7.6 billion in the quarter. The gains came amid challenging

AMSTERDAM — Led by a strong performance by its U.S. banners, Ahold [4] posted a 6.2% increase in net income during the first quarter, the company here said last week.

In the U.S., where the company operates the Stop & Shop, Giant-Landover and Giant Carlisle chains, identical sales improved 3.2% excluding fuel, and total sales increased 7.4% to $7.6 billion in the quarter. The gains came amid “challenging market conditions” including inflation, a stagnant job market and aggressive competition, Dick Boer, Ahold's chief executive officer, said in a conference call. Income as a percentage of sales in the U.S. increased to 4.6% from 4.2% a year ago as Ahold was able to control its own costs during the quarter, Boer said.

Companywide, inflation outpaced sales growth in the Netherlands, bringing margins down in Europe and nearly flat at 5% overall. Total sales of $13.5 billion (U.S.) improved 5.9%, and net income of $425 million was up 6.2%. Analysts were expecting slightly higher earnings.

Sales in the U.S. benefited by around 1% — and margins by 20 basis points — as a result of the Easter holiday which fell in the last week of the first quarter this year, meaning the slow week following Easter will be reflected in the second quarter.

That tempered expectations, noted Patrick Roquas, an analyst for Rabobank, Utrecht, Netherlands.

Boer, who was named CEO last fall, told analysts that he'd spent almost three months visiting Ahold's various divisions and talking to employees. That input is contributing to a refined strategy, which he said he would share more details of later this year. Boer said Ahold's current strategic focus is built upon on “pillars,” including increasing customer loyalty; broadening its offering, including exploring new formats; and expanding into new geographies. Enabling that growth is a focus on simplifying the business, promoting responsible retailing, and “having the right people with the right skills in the right role.”

“I wouldn't underestimate today what these six strategic pillars are bringing to an organization like ours,” Boer said. “I'm sure it will create a lot of energy in the organization and also focus.”

Roquas said Ahold was “outpacing peers operationally” but was awaiting “signs of a more aggressive approach regarding the capital structure and towards improving the group's growth profile,” before recommending the stock.

Boer characterized conditions in the U.S. as difficult but said Ahold managed well in the first quarter by balancing cost controls, inflationary pressures and margins. “The [U.S.] market is still under pressure, with high inflation that is making it difficult for all of us in the retail market.”

He said Ahold and its competitors remained highly promotional during the quarter, but noted Ahold was in a better position than its peers to get promotional deals from manufacturers because it was adding volume.