Sponsored By

Ahold Delhaize tallies Q1 sales gains

Executives note Stop & Shop strike’s financial impact to hit in Q2

Russell Redman

May 8, 2019

4 Min Read
Supermarket News logo in a gray background | Supermarket News

U.S. sales edged up in the first quarter at Ahold Delhaize as the global food retailer moved forward with strategic initiatives to upgrade stores, boost omnichannel operations and rein in costs through improved synergies.

Also on Wednesday, executives reiterated their estimate of the financial impact of the 11-day strike at Stop & Shop, noting that the Quincy, Mass.-based supermarket chain — the company’s largest by sales — will feel the work stoppage’s effects in the second quarter.

Net sales at Ahold Delhaize USA totaled $10.98 billion in the first quarter, up 1.1% from $10.86 billion a year earlier. Online sales climbed 13% year over year to $251 million from $222 million. Same-store sales rose 1.2% excluding fuel and were up 2.2% when adjusted for the Easter calendar day shift.

Frans_Muller_Ahold_Delhaize_2018.png“Our U.S. business showed a good performance, with margins benefiting from synergies and with savings ahead of investments in our customer proposition as part of our Save for Our Customers program,” Ahold Delhaize President and CEO Frans Muller (left) told analysts in a conference call this morning.

U.S. operating income increased 16.9% (7.9% at constant exchange rates) in the quarter to $516.3 million, with underlying operating income up 16.4% (7.5% at constant exchange rates) to $532 million. Ahold Delhaize said higher gross margins drove a 0.3% gain in underlying operating margin to 4.9%, reflecting synergies and savings from Save for Our Customers.

Related:Financial hit from Stop & Shop strike could top $100 million

“As Frans mentioned, we had strong synergy and savings for our customer delivery in the first quarter and, therefore, underlying operating margin was particularly strong in the quarter at 4.9%, up 30 basis points versus last year,” Ahold Delhaize Chief Financial Officer Jeff Carr said in the call. “However, we will see more investments in our customer proposition in the following quarters, and I'd not expect to see that high trend of margin continue.”

For the strike at Stop & Shop, which lasted from April 11 to 21 and affected 246 New England stores, Ahold Delhaize estimated lost sales of $200 million. Adding increased product waste and extra supply chain costs, the company expects a one-off impact of $90 million to $110 million on underlying operating income in the second quarter.

“The members of the UFCW Unions ratified the new collective labor agreement last week, and we feel that the new contract is fair and responsible. Our total labor cost at Stop & Shop is expected to increase in line with inflation,” Muller said.

“Now, two weeks after the strikes, customers are coming back and sales continue to ramp up,” he added. “We continue to prepare for the next phase of the rollout of Stop & Shop's ‘Reimagining’ program in Long Island, N.Y., based on the learnings from the remodeled Hartford, Conn., stores in the fourth quarter last year. And we are still awaiting FTC approval for the acquisition of King Kullen stores on Long Island.”

Related:Ahold Delhaize USA eyes smarter supply chain

In a question-and-answer session later in the earnings call, Muller said, “Nobody has won in this strike. It's a very unfortunate event for everybody involved.”

During the first quarter, Ahold Delhaize noted, Food Lion announced a $158 million project to remodel 92 stores in the Myrtle Beach, Florence, Columbia and Charleston, S.C., markets this year, along with a $40 million investment to upgrade 23 stores in the Charlottesville and Harrisonburg, Va., markets. The initiatives are part of Food Lion’s “Easy, Fresh and Affordable” program to enhance the shopping experience and expand variety and assortment. The Giant/Martin’s division also opened the first location of its Giant Heirloom Market urban format in Philadelphia and launched a new online brand called Giant Direct with the opening of an e-commerce hub in Lancaster, Pa., with Peapod Digital Labs.

Ahold Delhaize USA ended the first quarter with 1,961 stores under the Stop & Shop, Giant Food Stores, Martin’s, Giant, Food Lion and Hannaford banners, compared with 1,963 a year ago. The U.S. business also includes online grocer Peapod.

Overall for the first quarter, Ahold Delhaize totaled net sales of €15.88 billion ($17.78 billion U.S.), a gain of 6.3% (1.5% at constant exchange rates) from €14.99 billion ($16.79 billion U.S.) in the prior-year period. The company said the timing of the Easter holiday had a negative impact on sales results. Net consumer online sales grew 27.5% (25% at constant exchange rates) to €970 million ($1.09 billion U.S.).

Net income totaled €436 million, or €0.39 per share (continuing operations), compared with €403 million, or €0.33 per share, a year ago. Operating income rose by 8.3% (2.9% at constant exchange rates) to €675 million for the quarter.

“We reported a solid first quarter, growing both our top line and our bottom line compared to last year,” Muller told analysts. “As our results are starting to illustrate, the execution of our Leading Together strategy is on track. Throughout our businesses, we help our customers make healthier choices. Innovative solutions make shopping more convenient and less time-consuming. And we continue to invest in our network both in stores and online.”

Ahold Delhaize finished the quarter with 6,769 stores, compared with 6,785 a year ago. Besides the U.S. locations, the total includes 2,151 stores in the Netherlands, 777 stores in Belgium, and 1,880 in Central and Southeastern Europe.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

Stay up-to-date on the latest food retail news and trends
Subscribe to free eNewsletters from Supermarket News

You May Also Like