Ahold said U.S. sales were down in the first quarter and comps were flat, citing effects of lower gas prices, an earlier Easter holiday, and harsh winter weather.
Excluding the effect of gas prices, which were down by 35% as compared to the same period last year, U.S. sales improved by 0.4%. Identical store sales excluding gas improved by 0.1%.
Officials in a conference call discussing results said despite the modest sales, U.S. volume market share improved, as did customer price perception as effects of ongoing “Project Thunder” investments slowly take root. CEO Dick Boer maintained the company was sticking with expectations that comps would improve modestly for the year.
Boer said Project Thunder’s phase 2 — investments to assure market-leading prices on 30 of the most popular items — is currently concentrated at its Giant-Landover division to head off price activity from Harris Teeter and Safeway in that market, and would be implemented in all of Ahold’s stores by the end of next year. Sales results of the effort are masked in part by the fact that Ahold has also absorbed inflation while doing so, Boer said.
“You could look at 40 basis points of growth and say, look, that’s not a lot,” he said. “On the other hand, we are taking quite some of the inflation in. And we're pleased with the fact that our market share in volume is growing now.”
Phase 3, consisting of revamped merchandising for produce, has launched in 75 stores during the first quarter. Phase 1, which covered price investments and associate training initiatives, is nearly complete, Boer said.
The company in the meantime sales pace at Peapod had dipped to single digits as its new facility in New Jersey has struggled to ratchet up capacity. By contrast Ahold’s online businesses in Europe are growing by more than 20%.
“There’s no question that we are disappointed with Peapod performance where the online growth is in the single digits. And we need to overall match the European levels that we're getting,” Jeff Carr, Ahold’s CFO, said. “We're seeing improvements at the New Jersey warehouse on a weekly basis. And we expect, as we go through the second quarter, already to start seeing some improvements getting back into double-digit growth rates. But it will be more into the third quarter and the fourth quarter where before we're fully up to expectations in terms of the growth in the U.S. So, it has been a difficult nine-month period for Peapod.”
Boer declined to answer questions about the ongoing discussions with Delhaize on a potential merger.
In the U.S., sales totaled $7.6 billion. Investments in price led to declines in underlying operating income and margins. Companywide sales, adjusted for currency fluctuations, improved by 1.4% to $10.7 billion (U.S.), helped by strong sales in the Netherlands.
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