Ahold Delhaize Posts Solid Q4

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Ahold Delhaize Posts Solid Q4

03/01/2017

Ahold Delhaize’s Better Together strategy is moving the company in the right direction, as evidenced by slightly better-than-expected progress in the fourth quarter, spurred by strong performance in the Netherlands and its Delhaize America division.

The company posted a 2.8 percent sales increase of $16.3 billion for the fourth quarter of fiscal 2016, adjusted for the 53rd week in 2015, along with 3.9 percent operating margin gain. For the full year, the underlying margin jumped 3.7 percent, a 20-basis-point increase from last year.

According to CEO Dick Boer, “2016 was not only a year where we brought together two strong food retailers. It was also a year in which our great local brands drove solid performance, serving our customers both in stores and online.”

Boer expressed satisfaction with the company's Q4 "volume growth and strong margins," while noting the "good progress" being made to implement Better Together, which was revealed in December. "Our teams are working hard on the integration, leveraging best practices and realizing synergy targets.” He added that the Q4 sales rise drove "volumes while operating in a deflationary environment in the U.S.” 

U.S. Performance

Commenting on Ahold USA, Boer noted that it “continued to focus on its Heading Northeast strategy by offering better value, better quality and improved service to its customers, resulting in resilient volume trends. Underlying operating margin performance was slightly better than last year, adjusted for week 53 last year, supported by ongoing cost initiatives and synergies.”

Fourth-quarter net sales at Ahold USA fell 7 percent at constant exchange rates to $5.9 billion. However, sales adjusted for the additional week in 2015 edged up 0.7 percent at constant exchange rates, compared with the year-ago period. Comparable-sales growth excluding gasoline dipped 0.2 percent, affected by the aforementioned deflationary market as well as competitive closures in the Stop & Shop New York metro market last year.

Meanwhile, “Delhaize America showed continued good performance at both Food Lion and Hannaford with strong volume growth, more than offsetting the impact of deflation on sales,” continued Boer. “Underlying operating margins improved, driven by the Easy, Fresh & Affordable strategic initiative and synergies.” 

Net sales at Delhaize America for the fourth quarter rose 2 percent to $4.2 billion at constant exchange rates, while comps grew 2.2 percent.

Ahold Delhaize’s strong free cash flow for the full year not only allowed it to keep funding growth in key channels, but also to return excess liquidity to shareholders in the form of a share buyback introduced in January and slated to be carried out throughout 2017, he observed.

Additionally, as a result of he company’s solid performance, it was able to propose a dividend 9.6 percent higher than Ahold’s last year, representing a payout ratio of 48 percent pro forma underlying income from continuing operations.

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