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05/12/2021

Online Sales Lift Ahold Delhaize in Q1

FreshDirect acquisition supercharges the surge
Gina Acosta
Executive Editor
Gina Acosta profile picture
a store filled with lots of counter space
Ahold Delhaize's Giant Food brand has 160 locations in the U.S.

Ahold Delhaize is raising its 2021 earnings outlook after online sales penetration surged 188.3% in the U.S. in the first quarter.

The grocery chain boosted its EPS forecast to a low to mid-teen percentage, up from the mid to high single-digit growth it previously forecast, citing supercharged digital sales across all of its banners.

During the first quarter, net consumer online sales accelerated to 103.3% at Ahold Delhaize, including U.S. growth of 188.3% and 78.6% growth in Europe. In the U.S., the online sales surge was driven in part by the company's FreshDirect acquisition. Excluding the FreshDirect acquisition, the U.S. online sales growth rate in first quarter accelerated to 135.2% growth versus 128.5% growth in Q4 2020. 

"Although COVID-19 continues to impact our results, we have now entered a period where our year-over-year growth rates are affected by the lapping of difficult prior year comparisons," said Frans Muller, president and CEO of Ahold Delhaize. "That said, we begin 2021 in a strategically stronger position than before the COVID-19 pandemic began. We remain focused on making additional investments to meet associate, customer and community needs."

Same-store sales excluding gas grew 1.7% in the U.S. in first quarter. Comps were positively impacted by demand related to COVID-19, particularly in January and February. To a lesser extent, comps were also favorably impacted by approximately 1.7 percentage points from calendar shifts and a weather impact. This was offset, in part, by a decline in March's comparable sales, which were unfavorably impacted by the lapping of significant consumer stock-up activity related to COVID-19 in 2020, when comparable sales excluding gasoline grew 33.8%. On a two-year stack, same-store sales excluding gas in the U.S. increased 15.5% in the first quarter ended April 4. Brand performance was led by Food Lion. 

Underlying operating margin in the U.S. was 4.8%, down 1.8 percentage points from the prior year at constant exchange rates, as margins lapped unusually high levels in the prior year due to COVID-19. Margins in 2020 benefited largely from the timing of unexpectedly higher sales that preceded the timing of significant costs related to COVID-19, an effect which did not recur in Q1 2021.

"We've been able to retain a strong level of underlying consumer demand by continuing to adapt to the enduring consumer behavior changes, including increased working from home, preference for healthy and fresh products, and higher online demand," Muller said. "Our brands were well positioned to satisfy the changing needs and preferences of their customers, many of which were trends already developing prior to COVID-19. As these trends accelerated during COVID-19, our brands have evolved more quickly to adapt."

Group net sales at Ahold were $22.2 billion, up 0.3% at actual exchange rates and up 5.8% at constant exchange rates, driven largely by 4.2% same-store sales growth excluding gasoline. Group comparable sales were positively impacted in part by demand related to COVID-19, particularly within Europe. To a lesser extent, comparable sales benefited by approximately 1.3 percentage points from favorable calendar shifts and a weather impact in 2021. On a two-year comparable sales stack basis, growth for the group sequentially accelerated to 16.4% in first quarter versus 13.7% in Q4 2020. Group net consumer online sales grew 103.3% in first quarter at constant exchange rates, aided by the FreshDirect acquisition, which closed on Jan. 5.

Group underlying operating margin in first quarter was 4.6%, down 0.6 percentage points from the prior year at constant exchange rates, as margins lapped unusually high levels in the prior year due to COVID-19. Diluted underlying EPS was 65 cents. Margins in 2020 benefited largely from the timing of unexpectedly higher sales that preceded the timing of significant costs related to COVID-19 in the U.S., an effect which did not recur this year. 

"Investing in our business in order to solidify our position as an industry-leading local omnichannel retailer in 2021 and beyond remains a key priority," Muller added. "We continued to build upon several important initiatives to increase our share of the consumer wallet and improve online capabilities, including increasing our online capacity, driven in part by our recently opened U.S. click-and-collect locations; moving forward with the launch of Ship2Me in the U.S., an 'endless aisle' offering of over 100,000 general merchandise and food items, in the second half of the year; and rolling out the no-fee home delivery service AH Compact to additional markets in the Netherlands. With increased capacity and strong momentum, we now expect Group net consumer online sales to grow by over 40% in 2021 versus 30% previously. This includes the raised expectations for over 70% growth in U.S. online sales, versus over 60% growth previously."

Ahold Delhaize also continues to make progress in elevating its Health and Sustainability strategy, and recently announced a new goal for all brands to achieve net-zero carbon emissions by 2050. In March, Albert Heijn was voted by consumers as the Netherlands' most sustainable supermarket chain in the Sustainable Brand Index 2021 ranking for the fifth consecutive year. The Giant Co. in the U.S. announced a new partnership with the Rodale Institute in February to develop solutions for the regenerative organic agriculture movement. The company also successfully priced an inaugural sustainability-linked bond in March, amounting to $726 million with a term of nine years, linked to achieving targets in reducing food waste and scope 1 and 2 carbon emissions by 2025.

Ahold Delhaize USA, a division of Zaandam, Netherlands-based Ahold Delhaize, is the parent company for Ahold Delhaize’s U.S. companies, consisting of Food Lion, Giant Food, The Giant Co., Hannaford, and Stop & Shop, as well as e-grocer Peapod; Retail Business Services, a U.S. support services company providing services to the brands; and Peapod Digital Labs, its ecommerce engine. Operating more than 2,000 stores across 23 states, Ahold Delhaize USA is No. 11 on The PG 100, Progressive Grocer’s 2020 list of the top food and consumables retailers in the United States