Ahold said Wednesday it plans to invest more heavily in the quality and merchandising of its fresh assortment, in employee training and in targeted price reductions in all of its U.S. divisions.
Executives at the Zaandam, Netherlands-based company explained the program in releasing first-quarter results, which showed margins eroding amid competitive and inflationary pressures.
The new program being rolled out in the U.S. was piloted in the second half of 2013, “resulting in encouraging volume uplifts,” Ahold said in a statement. By the end of the first quarter, the program was active in 190 stores.
“We are accelerating our plans for further rollout, increasing the intensity of the program in New England specifically,” Dick Boer, Ahold CEO, said in a conference call with analysts.
Ahold operates the Stop & Shop banner in the New England and New York metro markets, as well as the Giant of Carlisle, Pa., and Giant of Landover, Md., divisions. By the end of 2014, Ahold said it expects the program to be implemented in more than 50% of its store base, largely funded by the expected $250 million “simplicity” program of cost savings in U.S.
Underlying operating income in the U.S. was down 4.9% at constant exchange rates, to $227 million. Underlying operating margin of 3.9% was 0.2% lower than the first quarter of a year ago, which the company attributed in part to its decision to absorb the “considerable” cost inflation in the meat and produce categories.
As previously reported, sales in the U.S. were down 0.3% at constant exchange rates, to $5.86 billion. Idenitcal-store sales growth was up 0.1%, which the company said included the positive impact of the slower, post-Easter week falling in the second quarter this year.
“The market was characterized by a continued focus on value and volumes remained under pressure,” the company said in a statement. “Our market share was down slightly, mainly driven by competitive pressures in New England.”
Ahold said its online Peapod operation, based in Chicago and providing online ordering and delivery for all of the U.S. banners, had double-digit sales growth in the quarter. It opened 47 new pick-up points for its fast-growing “click-and-collect” service, bringing the total to 167.
Overall Ahold posted a sharp decline in net income relative to a year ago, primarily due to a one-time gain in of about $2.38 billion from the sale of its ICA joint venture in the first quarter of 2013, and a $240 million settlement of class-action litigation related to its former U.S. Foodservice division in the first quarter of this year.
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