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02/16/2022

Ahold Delhaize to Accelerate Omnichannel Strategy

Grocery chain says digital is key to capturing incremental sales
Gina Acosta
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Ahold says offering shoppers an omni-grocery experience is key to capturing incremental sales growth.

Ahold Delhaize plans to accelerate its investments in omnichannel as inflation and supply chain snarls put more pressure on sales and profits.

In its fourth quarter earnings report, the grocery chain said supply chain disruptions, inflation and rising costs as well as the expected easing of government subsidies to consumers will pose challenges for the company and the grocery industry in 2022. 

To offset some of those pressures, the Dutch grocery chain said it plans to accelerate omnichannel investments to capture "the incremental growth opportunities we see over the horizon, enabled by our platform," said Frans Muller, president and CEO of Ahold Delhaize. "The global COVID-19 pandemic continues to highlight the importance of strong omnichannel food retail operations that offer consumers a variety of shopping options, including robust online offerings."

Ahold ended 2021 with accelerating fourth quarter sales; on a two-year comparable sales growth basis, Q4 comparable sales excluding gas increased 16% in the United States and 11.6% in Europe, accelerating versus the third quarter in both segments.

"We ended 2021 on a strong note, with positive group Q4 comparable sales momentum and stable group margins, positioning us for a strong start to the next phase of our Leading Together strategy announced last November," Muller said. "Looking back on the past year, I am most proud of how associates brought our values to life in the way they responded to ongoing developments associated with COVID-19 and natural disasters throughout our brands' markets, including major floods in Belgium, tornadoes in the Czech Republic, fires in Greece and Hurricane Ida in the U.S. Through it all, associates rose to the challenge to care for customers and communities. As a result, we enter 2022 with deeper relationships and trust across our brands' markets and stronger market shares to build upon."

To advance its omnichannel offerings in the United States, Ahold's Giant Food banner launched online marketplace solution Ship2me during the quarter, initially offering around 40,000 additional general merchandise and food items. The company's U.S. brands also added new click-and-collect locations in fourth quarter, for a total addition of 270 in 2021.

The grocery chain's Giant Co. banner also opened an e-commerce fulfillment center in the Philadelphia market in fourth quarter.

"It is supporting our growth and productivity ambitions for 2022 and beyond. We continue to invest across our entire distribution network and build new digital capabilities," Muller said.

During the fourth quarter, Ahold's U.S. net sales increased by 1.5% at constant exchange rates (5.9% at actual exchange rates). Excluding last year's 53rd week, Q4 U.S. net sales grew by 9.2% at constant exchange rates. U.S. comparable sales excluding gasoline increased 4.8%. Unfavorable weather negatively impacted Q4 U.S. comparable sales by approximately 0.2 percentage points.

Brand performance continued to be led by Ahold's Food Lion banner, which has now delivered 37 consecutive quarters of positive sales growth.

In the quarter, online sales in the segment were up 30.5% in constant currency, driven by the continued expansion of click-and-collect facilities and the FreshDirect acquisition. Excluding the FreshDirect acquisition, U.S. online sales grew 7.5% in constant currency, building on top of the significant 128.5% growth in the same quarter last year.

Underlying operating margin in the United States was 4.4%, up 0.5 percentage points at constant exchange rates from the prior year period, driven by reduced COVID-19-related costs and strong cost-savings initiatives. While the absence of one-time costs in the prior year quarter were offset by lapping last year's extra week, Q4 U.S. underlying operating margins benefited by 0.3 percentage points from a favorable reserve release. In fourth quarter, U.S. IFRS-reported operating margin was 5.5%.

During the quarter, Ahold earned an upgrade to its MSCI ESG ranking to 'AA' from a previous 'A' ranking. The company also maintained its standing in the Dow Jones Sustainability Index.

"Our score of 83 out of 100 was well above the industry average 26 points and placed us highest among food retailers in Europe and the U.S.. We expressed our intention to make continued progress on the ESG front through our decision in Q4 to pull forward our commitment to reach net-zero carbon emissions across our brands by no later than 2040. And we will actively apply this lens as we invest in our future," Muller said.

Ahold Delhaize USA, a division of Zaandam, Netherlands-based Ahold Delhaize, operates more than 2,000 stores across 23 states, is No. 10 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America.

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