Ahold Delhaize Posts ‘Solid’ Q3

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Ahold Delhaize Posts ‘Solid’ Q3

11/17/2016

As it confronts ongoing price deflation and competitive pressure in its key U.S. marketing territories, Ahold Delhaize posted net sales of $14.8 billion, an increase of 64.2 percent, in the third quarter of 2016, when its net income grew by 25 percent to $252 million to generate a net sales gain of 2.6 percent to $15.5 billion.

Dick Boer, CEO of the Netherlands-based retail conglomerate, hailed the “solid performance in our first full set of quarterly results since completing our landmark merger in July. Despite challenging conditions in certain markets, Ahold Delhaize has delivered growth in sales and in underlying operating income on a pro forma basis, which reflects the strength and resilience of our great local brands, as well as our continued focus on delivering cost efficiencies across our businesses while driving top-line growth.”

During a call with investors on Thursday, Boer said the third quarter results "reflect the strength and resilience of our great local brands, as well as our continued focus on delivering cost efficiencies across our businesses while driving top line growth." However, he continued, "The trading environment in U.S. remained challenging with ongoing price deflation and competitive pressure in our markets."

Boer said the program "to improve the customer proposition at Ahold USA, together with the strengthening of the Stop & Shop store network in the New York metro area, resulted in volume growth. At Delhaize America, both Food Lion and Hannaford continued to experience positive comparable sales and volume growth. Third-quarter sales growth was impacted by increased retail price deflation, mainly at Food Lion, as a result of a more intense competitive environment," largely as a result of Wal-Mart Stores Inc., which has been slashing prices in its key markets of North and South Carolina.

As for the performance of the company's U.S. operations, which accounts for roughly two-thirds of its sales, Ahold USA’s net sales increased by 2.4 percent. Sales growth, excluding gasoline, was 3.4 percent while same store sales, excluding gas, rose by 0.3 percent. The gains were partly offset by retail price deflation as a result of price investments rolled out at the close of the first quarter, and overall market deflation in the main product categories. Ahold USA grew its year-over-year market share, which was primarily driven by the acquisition of A&P stores in the New York metro market at the end of Q3 2015. During the quarter, Ahold USA divisions successfully rolled out new produce and bakery departments, and in the last week of the quarter, introduced a new round of price investments as part of its program to provide better value to customers.

Meanwhile, Delhaize America’s Q3 net sales for Food Lion and Hannaford increased by 1.1 percent to $4.1 billion while comps grew 1.3 percent. During the quarter, sales growth was affected by higher retail price deflation, mainly attributable to a more intense competitive environment for Food Lion. In October, the Matthews, N.C.-based division relaunched 142 remodeled stores under the Easy, Fresh & Affordable initiative in the Charlotte, N.C., area. Previously relaunched stores continue to perform as expected in their respective markets, both in terms of sales and costs.

All in all, according to Boer, “Ahold Delhaize made significant progress in our first quarter together, and we are continuing to carry out our post-merger integration plans.”