Ahold Delhaize’s ‘Strong’ Q4 Caps 1st Full Year Post-Merger

Ahold Delhaize posted a “strong performance” during Q4 2017, completing its first full year as a merged company, during which it “substantially completed the integration” of the corporate entities, according to CEO Dick Boer.

The Zandaam, Netherlands-based retail conglomerate reported net sales of €15.8 billion ($19.3 billion), up 1.6 percent at constant exchange rates; net income of €744 million ($908.7 million), a 318.0 percent increase (377.9 percent at constant exchange rates); pro forma net sales of €15.8 billion ($19.3 billion), up 2.5 percent at constant exchange rates; and a pro forma net consumer online sales increase of 23.2 percent at constant exchange rates.

“We delivered synergies ahead of schedule and continued to show underlying operating margin expansion, with stable or increasing market share in our major markets,” noted Boer, adding: “In a dynamic environment, our great local brands delivered strong results, tapping into changing consumer behavior."

During the period, Ahold Delhaize grew online consumer sales by more than 20 percent, with already €1.2 billion ($1.5 billion) sales in food online. In 2017, it realized €2.8 billion ($3.4 billion) online consumer sales and is "well on track" to realizing nearly €5 billion ($6.1 billion) by 2020.

Ahold Delhaize is expanding digital capabilities in all its brands and rolling out successful customer loyalty programs. In 2017, it sent out close to 2.5 billion personalized offers, which it expects to increase significantly in 2018.

“We are investing to make shopping more convenient, introducing new technologies to improve the customer experience and further ease the checkout process, as we live up to our promise to be a better place to shop," Boer noted. "We also are stepping up our focus on fresh inspiration as customers are increasingly looking for healthier options, organic products and locally grown produce, which will help us to reach our target of 50 percent healthy products in own-brand sales by 2020.”

U.S. Q4 Performance

In the United States, “[b]oth Ahold USA and Delhaize America reported strong underlying operating margins, driven by synergies,” noted Boer. “Inflation remained at low levels, and volumes at Food Lion continued to benefit from the implementation of its Easy, Fresh and Affordable program that has now been rolled out to more than half of its store base. Hannaford reported its 15th consecutive quarter with positive comparable-sales growth.”

Further, he observed: “We are making good progress deploying our Better Together strategy and are on track implementing our brand-centric organization at Ahold Delhaize USA, which we expect to be completed by the end of the first quarter of 2018. The synergy delivery is ahead of schedule, with €268 million net synergies realized for the year.”

Boer also observed that a strong free-cash flow enabled the company “to continue to invest" in its store network, grow its omnichannel offering and further develop its digital capabilities, providing customers with a unique and competitively priced offer.

Ahold USA’s Q4 pro forma net sales increased 1.1 percent at constant exchange rates to €5,566 million ($6,798 million). Sales growth excluding gasoline was 0.6 percent, and comparable sales excluding gas edged up 0.6 percent, slightly higher after adjusting for weather and holiday shifts versus the previous quarter. Price inflation was 1.1 percent, broadly in line with the previous quarter.

During the quarter, Giant Carlisle opened eight new in-store Beer & Wine Eatery locations, operating 54 of these establishments by year end. Online grocer Peapod upped its customer satisfaction score by improving key drivers such as on-time delivery, available delivery slots, in-stock items, value perception and the user-friendliness of its website. Strong synergy savings and “save for our customers” programs were partly offset by lower pharmacy margins, produce cost pressures and higher promotional spend, however.

Going forward, in early 2018, Stop & Shop will begin the pilot of its Scan it and Go payment solution, which will allow customers to make automatic bank withdrawals at checkout.

Meanwhile, at Delhaize America, Q4 pro forma net sales rose 1.4 percent to €3,683 million ($4,498 million) at constant exchange rates, and comparable sales increased 1.5 percent, with both Food Lion and Hannaford posting positive comps growth, and market share expected to rise from last year. Food Lion continued to benefit from the rollout of the Easy, Fresh and Affordable store remodel program in the Charlotte, N.C., market last year and the Richmond, Va., and Greensboro, N.C., areas this year. Price inflation, at 0.7 percent, was broadly similar to the previous quarter.

Food Lion also successfully completed the pilot of its Shop & Earn digital loyalty program, which offers customers personalized savings on their preferred products and categories. The program will roll out to all markets in the first quarter of 2018. At Hannaford, the My Hannaford Rewards loyalty program launched at more stores during the quarter, becoming available chain-wide in January 2018. The banner also further expanded its Hannaford To Go click-and-collect service. Strong synergy savings and “save for our customers” programs were partly offset by wage hikes and higher depreciation expenses mainly related to Food Lion’s Easy, Fresh and Affordable investments.

In 2018, Ahold USA and Delhaize America segments will be combined in financial reports, reflecting governance structure.