Ahold Delhaize Raises Free Cash Flow Guidance for 2023
Preparing the company for the next phase of growth and value creation, Ahold Delhaize has raised free cash flow guidance for 2023.
For 2023, the company now expects free cash flow in a range of €2.2 billion to €2.4 billion (previously: a range from €2.0 to €2.2 billion); underlying EPS slightly below 2022 levels (previously: around 2022 levels); and net capital expenditures of approximately €2.4 billion (previously: €2.5 billion). The company reiterates underlying operating margin of ≥4.0%.
For third quarter, Ahold Delhaize reported that its comparable sales excluding gas increased by 3.1%, 0.9% in the United States and 7.0% in Europe. According to the company, increased market share in key markets reflects strong customer loyalty to locally tailored customer value propositions.
"Inflation, increasing interest rates and changes in U.S. government support remain tangible headwinds and are creating anxiety for many customers," said CEO Frans Muller. "Our great local brands have been agile in expanding their assortments with high-quality own-brand products at great prices and swift to pass on price reductions where possible. They continue to invest in and leverage the power of our digital capabilities to provide customers with meaningful, highly personalized discounts tailored to their needs and wallets.”
In Q3, net consumer online sales increased by 6.4% at constant exchange rates. Double-digit growth at Food Lion and Hannaford as well a strong market share gain fueled this performance.
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U.S. net sales were €13.6 billion, an increase of 0.5% at constant exchange rates and down 7.1% at actual exchange rates. U.S. net sales were driven by comparable sales growth excluding gasoline of 0.9%, with strong growth in pharmacy, partially offset by lower gasoline sales. Excluding the impact of weather and calendar shifts, U.S. comparable sales growth was 1.0%, partially offset by the end of emergency SNAP benefits and the moderation of inflation rates. Hannaford and Food Lion continue to lead the U.S. brands' performance. Food Lion has now delivered consecutive positive sales growth for 11 years.
“On its own, the reduction in SNAP benefits resulted in approximately a four percentage-point headwind to sales growth in the third quarter," said Muller. “While we were able to offset a large portion of this headwind through our strong value propositions and ongoing momentum in online sales, the dilutive impact of a changing sales mix and increasing shrink contributed to slightly lower-than-expected U.S. margins. With the help of measures we are putting in place through our Accelerate initiatives, in-store actions to reduce shrink and further volume support incentives from vendors, we expect this modest margin pressure to be transitory and pass in a couple of quarters.”
Additionally, Ahold Delhaize USA entered into an agreement to sell its FreshDirect business to Getir, a pioneer in ultrafast grocery delivery operating in key markets in the United States and globally. Following a thorough review, Ahold Delhaize USA made the decision to sell the FreshDirect business to focus investments in its omnichannel businesses.
Ahold Delhaize announced that its Strategy Day will be held in the Netherlands in May 2024 to present the next phase of growth and value creation for company.
The company also announced a €1 billion share buyback program to start at the beginning of 2024.
Ahold Delhaize USA, a division of Zaandam, Netherlands-based Ahold Delhaize, operates more than 2,000 stores and more than 20 distribution centers across 20-plus states and is No. 10 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. PG also named the company one of its Retailers of the Century and its 10 Most Sustainable Grocers.
