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Ahold Posts Q3 Sales Increase

In its interim report for the third quarter of 2015, Netherlands-based retail conglomerate Ahold revealed a group sales increase of 13 percent. Underlying operating income grew to $342.6 million, with the underlying operating margin remaining at 3.8 percent. Operating income rose to $305 million, and net income grew to $203 million.

Meanwhile, in the United States, underlying sales trends continued to improve and one banner made an advantageous acquisition.

"The group delivered a strong performance during the third quarter, and we are pleased to report an increase in sales, operating income and net income, as well as a strong free cash flow," noted CEO Dick Boer. "We made further progress against our strategic priorities, and the investments in our brands are strengthening our customer proposition across all of our markets."

Boer added that "in the United States, Peapod's performance improved, reporting double-digit sales growth. We rolled out our enhanced customer proposition in the U.S. to additional stores during the quarter and as a result, we saw an improved underlying sales performance across our divisions."

For the first three quarters of the year, underlying operating income was $1,117 million, up from $1,037 million logged in the year-ago period. Underlying operating margin was 3.7 percent, versus 3.9 percent last year, which Ahold attributed mainly to higher investments in its online businesses and the integration of SPAR in the Czech Republic. Operating income increased to $1,000 million, due to increased restructuring and related charges, higher impairments, lower gains on the sale of assets, and other costs. Net income was $641 million, up as a result of such factors as higher operating cash flows from continuing operations offset by higher capital expenditures, lower proceeds from divestment of assets, and higher interest payments of interest.

U.S. identical sales growth was 1.8 percent, excluding gas and adjusted for last year's sales increase following a business disruption at one of the Stop & Shop New England division's main competitors. Total third-quarter net sales of $5,637 million were up 16.6 percent; however, due to lower gas sales, this was 1.4 percent lower than last year. Excluding gas, net sales were 0.8 percent higher than last year, while reported identical-sales growth excluding gas was 0.4 percent.

As part of an ongoing strategy, Ahold USA is continuing to roll out its produce department format, adding it to another 149 stores during the quarter, for a total to 316 locations. "We are encouraged by the volume uplift that we see in the converted produce departments," the company said, adding that with the exception of Stop & Shop New England, volume market share increased over last year. Additionally, the company's online business Peapod improved the capacity usage at its newest distribution facility, which no doubt contributed to its earlier-mentioned impressive sales growth.

Ahold USA's underlying operating margin was 4 percent, a 0.2 percentage-point increase from year-ago period. "The improvement reflects stronger operational performance across our business, driven by our Simplicity program, and reflects sourcing savings, improved labor efficiency and stronger shrink performance," the company explained. "Lower gas sales, due to falling gas prices, with a higher margin had a positive impact on the operating margin, but were more than offset by lower reimbursements on pharmacy products."

Additionally, Stop & Shop New York Metro has acquired 25 stores from the bankrupt A&P and is in the midst of converting them, with the final group of stores expected to be completed by mid-month.

"Looking ahead, we are on track to deliver a full-year performance in line with expectations and to complete the proposed merger with Delhaize by mid-2016," said Boer. "This combination will create a stronger international food retailer for the benefit of our customers, associates and shareholders."

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