Ahold Delhaize cited Food Lion and Hannaford as sales growth drivers in its U.S. business for the fiscal 2019 third quarter.
The global food retailer said Wednesday that net sales at Ahold Delhaize USA totaled $11.4 billion in the quarter ended Sept. 29, up 2% from $11.18 billion a year earlier. Online sales jumped 26.3% to $272 million from $215 million. Same-store sales rose 1.5% year over year but, excluding fuel, were up 1.8%.
"We saw a strong overall performance at our U.S. brands, particularly at Food Lion and Hannaford. Stop & Shop is operating in a challenging sales environment, but we are encouraged by improving transactions as we move into the fourth quarter. Our ‘Reimagine Stop & Shop’ program is off to a good start, and we are pleased with the sales uplifts seen in the 21 remodeled Long Island [N.Y.] stores, which are performing in line with our expectations,” Ahold Delhaize President and CEO Frans Muller said in a statement.
Comp-store sales in the third quarter reflect a 0.3% uptick from Hurricane Dorian, and excluding the lift from that storm and a 0.5% net benefit Hurricane Florence a year earlier, same-store sales excluding fuel for the 2019 quarter were up about 2%, Ahold Delhaize reported.
“Comparable sales were strong in light of challenging prior-year comparisons,” Muller stated. “We were encouraged to see the two-year stacked comparable-sales growth accelerated to 4.5% in the third quarter of 2019, adjusted for weather, versus 3.3% in the second quarter of 2019, adjusted for both the [Stop & Shop] strike and calendar-shift impacts.”
In a conference call Wednesday, Muller told analysts that Food Lion turned in its 28th straight quarter of positive comp sales, “clearly demonstrating ongoing momentum with the successful ‘Easy, Fresh and Affordable’ program, which was rolled out to another 115 stores in the quarter. At the end of 2019, Food Lion will have completed remodels of 830 stores, or 80% of the network.”
Stop & Shop’s remodeled stores in Hartford, Conn., are showing improved performance as well and outperforming existing stores in comparable sales, he added.
“At Stop & Shop, Giant/Martin’s and Giant Heirloom Market, we also plan to roll out frictionless checkout to 30 stores by the end of the year,” he said. “Customers can scan products with either their mobile or a handheld scanner that we provide and can then simply exit the store, bypassing the checkout. We also began ramping up the Fresh Kitchen and Culinary Innovation Center in Rhode Island in October. It will begin to develop distinctive, new own-brand meal solutions. This facility will also help us shorten the supply chain and present our customers a differentiating range in the various fresh departments.”
For the third quarter, U.S. operating income rose 5% (0.5% at constant exchange rates) to $391.2 million. Underlying operating income edged up 4.2% to $402.9 million but dipped 0.3% at constant exchange rates, with underlying operating margin down 10 basis points to 4.4%.
“The performance in the U.S. was very strong across most of our brands, especially at Food Lion, where we continue to see good volume growth and market share gains. That was somewhat offset by Stop & Shop,” Chief Financial Officer Jeff Carr said in the call. “Underlying operating margins were strong at 4.4% in the U.S., slightly down versus last year. And that's specifically due to the lower sales impact at Stop & Shop. Across the other brands, margins were stable or slightly up versus last year.”
On the e-commerce side, Ahold Delhaize USA totaled 537 online grocery pickup sites by the quarter’s end and has since continued the rollout.
“In the U.S., we reached our full-year goal of 600 click-and-collect locations already in October, which was ahead of schedule,” said Muller. “The new click-and-collect locations opened over the course of the year helped us to accelerate U.S. online growth to 26% this quarter. This gives us confidence that we will be able to exceed the 20% U.S. online sales growth for the full year.”
Ahold Delhaize USA finished the third quarter with 1,971 stores, compared with 1,959 a year ago, a net gain of 12. U.S. retail banners include Stop & Shop, Giant Food Stores, Martin’s Food Markets, Giant Food, Food Lion and Hannaford, as well as online grocer Peapod.
Overall for the third quarter, Ahold Delhaize tallied net sales of €16.69 billion ($15.01 billion U.S.), a gain of 5.8% (2.9% at constant exchange rates) from €15.78 billion ($13.57 billion U.S.) a year earlier. Net income came in at €453 million, or €0.44 per share (continuing operations), compared with €460 million, or €0.42 per share, a year ago. Operating income rose 1.1% to €679 million for the quarter but at constant exchange rates was down 1.7%.
Net consumer online sales companywide grew 30.8% (29.5% at constant exchange rates) to €1.1 billion ($989 million U.S.) in the quarter.
“Overall, we gained market share as a company on the East Coast in the U.S., and especially Food Lion and Hannaford had a very strong quarter. Stop & Shop is back to its pre-strike levels, and we also see in the fourth quarter improving customer counts,” Muller said in the question-and-answer segment of the analyst call.
As of the quarter’s end, Ahold Delhaize had 6,878 stores overall, compared with 6,698 a year ago, reflecting a net gain of 180. Besides the U.S. locations, the total includes 2,148 stores in the Netherlands, 787 stores in Belgium, and 1,972 in Central and Southeastern Europe.
“The competitive situation hasn't really changed significantly down the East Coast. We continue to Walmart in the south of our markets being competitive on price. But Food Lion continues to benefit from the Easy, Fresh, Affordable program. We had significant remodelings over the last quarter, and we continue to see strong performance in the market and strong sales across all of our Food Lion regions,” Carr added. “But Stop & Shop is clearly a key area of focus. We're not happy with the trends. It's not really a competitive issue so much in the New England market. There's a lot of self-help that we can do. And with the Reimagine Stop & Shop program, I'm confident we'll continue to see improvements.”