Deflation Dings Ahold Delhaize’s Q1 U.S. Sales

Ahold Delhaize has posted what it called “resilient” first-quarter fiscal 2017 results with an increase in margins for the group, despite what CEO Dick Boer admitted was an “ongoing deflationary environment in the United States.”

The Zandaam, Netherlands-based company’s net sales increased 65.1 percent (61.4 percent at constant exchange rates) to US $17.3 billion, while net income rose 72.8 percent to US $386.9 million (68.2 percent at constant exchange rates), pro forma Q1 sales were up 2.9 percent to US $17.2 billion (0.6 percent at constant exchange rates) pro forma underlying operating income grew 8.1 percent to US $656.3 million, and pro forma Q1 operating margin increased to 3.8 percent, versus 3.6 percent in the year-ago period.

Although, as Boer noted, U.S. sales “were impacted by continuing price deflation, adverse weather and the timing of Easter, we were able to offset the impact on margins due to the delivery of strong synergy savings in the quarter. Although deflationary pressure was in line with previous quarters, it improved towards the end of the first quarter, and we expect sales performance to improve in the second quarter and to operate in a slightly inflationary environment in the second half of the year.”

Further, according to Boer, “We continue to make significant progress on the implementation of our Better Together strategy, investing in our customer proposition while improving margins.”

Regarding the merger of Ahold and Delhaize, now 10 months old, “we are fully on track with the integration and we are delivering on our synergy targets,” he said. “We are driving forward our integration programs and continue to focus on sharing best practices across and within regions, as we aim to further strengthen our great local brands to ensure they remain customer-focused, close to their communities and positioned to win in their markets.”

Boer added that the company’s target for the full year of realizing US $239 million net synergies, including US $60.9 million realized year to date, remained in place, and it anticipated that the full-year 2017 underlying operating margin for the group would be higher than in 2016.

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