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Ahold Q1 Sales Up as U.S. Ops Grow Market Share

Ahold posted sales for the first quarter of its fiscal 2015 of $12.3 billion, a 14.9 percent increase over the year-ago period, with sales excluding gas up 3.1 percent. Sales in the Netherlands grew 5.7 percent, which the company attributed to successful promotions and an enhanced product offering.

However, the quarter's underlying operating margin of 3.5 percent – down from 4 percent last year – was due to the rollout of the program to improve the customer proposition in the United States, increased investments in the Dutch company's online businesses, and the integration of 49 Spar stores in the Czech Republic, which was completed during the quarter.

"We are encouraged by the positive momentum in our sales trend, with sales growth of 3.1 percent, excluding gas and at constant exchange rates, despite the adverse timing of Easter," said Ahold CEO Dick Boer. "We have continued to respond to the changing needs of our customers by making further price investments, increasing and improving our assortments, expanding our store network, introducing new formats, and continuing to strengthen our leading online proposition."

Added Boer: "In the U.S., we saw further benefits from our improved customer proposition, which we have continued to roll out to more stores during the quarter, resulting in an increased volume market share."

At Ahold USA, total Q1 net sales of $7.6 billion were up 19.9 percent, a 2.1 percent decline from last year, which the company attributed to lower gas sales. Excluding gas, net sales edged up 0.4 percent from last year, while identical sales growth was just 0.1 percent.

The underlying sales trends were positive, with the negative effect of the timing of Easter partly offset by additional sales following heavy snowfalls during the quarter in the Stop & Shop and Giant Carlisle markets.

During the quarter, the first wave of Ahold’s customer proposition program rolled out to another 183 stores, bringing the number of locations that have adopted the initiative to 704, with the next waves to be deployed in all U.S. banners. "The results of the program continue to show positive sales trends across all market areas, with improved identical sales performance versus the previous quarter, adjusted for Easter," Ahold noted. "We continued to focus on growing own-brand penetration across our businesses. In all of our market areas, we are sustaining the improvements in price perception scores seen at the end of last year."

Ahold USA's market share grew in volume for the third straight quarter, but was flat in dollars versus last year as a result of continuing price investments. In New England, the trend in market share development improved from Q4, and the company’s share in the Giant Carlisle and New York metro market areas grew.

The U.S. operations' underlying operating margin was 3.7 percent, a 0.2 percent dip from the year-ago period. According to Ahold: "The margin decline reflects cost price inflation outpacing retail pricing, specifically in our nonperishable product range, and our decision to absorb part of this cost. This cost was partly offset by lower promotional spend and Simplicity cost savings. Lower gas sales due to falling gas prices had a positive impact on the operating margin, but was more than offset by increased cost for snow removal, increased energy use and lower reimbursements on pharmacy products."

Additionally, during Q1 2015, Ahold USA began restructuring its support offices, with an early-summer completion date anticipated.

Regarding the outlook of the company as a whole, Boer observed, "Our business performance remains on track to deliver in line with full year expectations. We continue to execute our Reshaping Retail strategy, offering quality and value to our customers."

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