Ahold Delhaize raised its guidance for the fiscal year after reporting a 78% increase in profit and an incredible 127% increase in e-commerce sales due to "unprecedented" demand for groceries.
The Dutch owner of Stop & Shop and Giant Food made a net profit for the second quarter ended Aug. 4 of $818.1 million compared with $397 million for the same period last year. In the U.S., same-store sales excluding fuel were up 21% in the quarter, while European comps were up 10%. Net sales for the quarter rose 16% at constant exchange rates to $22 billion from $19 billion a year before, the company said. Earnings per share rose to 76 cents compared with 41 cents for the second quarter of 2019.
Ahold said it now expects to report low-to-mid 20% growth in EPS, compared with previous guidance of mid-single-digit range this year.
"The engagement and strong execution of our teams have translated this unprecedented demand in both the U.S. and Europe, due to Covid-19, into outstanding results," said Frans Muller, president and chief executive of Ahold Delhaize. "These developments, along with the benefit of comparing against the same quarter last year, when we saw a negative impact from the strike at the Stop & Shop brand in the US, have led to strong underlying operating margin performance in the quarter."
Ahold Delhaize has been reducing its debt, remodeling stores, adding to its fulfillment capacity and strengthening its e-commerce efforts as it looks to accelerate long-term growth and leverage the opportunity in higher demand for groceries amid the pandemic. Specifically, Muller said during an earnings call that click and collect is growing fast during the pandemic.
"We will get to 50% quite quickly, 50% share, the same indication we gave for the first quarter, which will not only support customer demand and growth levels but also will support profitability as click and collect has a better market profile than delivery," Muller said.
Muller also said Food Lion is now the company's "fastest growing brand and achieved its 31st quarter of consecutive growth with positive comp sales."
"It's proving that the high-density store network with its clear focus on fresh and affordable is hitting the sweet spot for what customers are looking for today," Muller said. "We also agreed to acquire 62 stores from Southeastern Grocers, which will be converted to the Food Lion brand. And that should further help improve an already very strong market position as a brand in 2021 and beyond."
Ahold said coronavirus-related costs during the first half of the year were approximately $392 million, including safety measures and enhanced associate pay.
"COVID-19 has presented adversity across society and business," Muller said. "I am also pleased that we were able to make important investments in additional safety measures, enhanced associate pay and benefits, and significant charitable donations, including to several local food banks. Additionally, our brands hired more than 45,000 associates globally in Q2.
"We continue to adapt to the changes we are seeing in consumer shopping patterns and behavior. One of these changes is the increased demand for our online offerings, which, combined with investments to increase capacity, has resulted in net consumer online sales growth of 127% in the U.S., at constant exchange rates, and 64% in Europe. Our increased investments in digital and omnichannel capabilities should lead to continued wallet share gains," Muller added.
As a result, the company said it now expects over 55% growth in global net consumer online sales in 2020.
"This puts us on track to reach our goal of doubling global net consumer online sales from $4.1 billion in 2018 to $8.3 billion in 2020, one year earlier than we outlined at our November 2018 Capital Markets Day," Muller said.
Ahold said it plans to open 20 more remodeled Stop & Shop stores in the second half of the year.
During the second quarter, Ahold published an inaugural Human Rights Report outlining the steps the company is taking to safeguard human rights. It also issued its first Sustainability Bond Report in June, documenting how the company used bond financing from 2019 to support sustainable products, reduce climate impacts and promote healthier eating.
"We have subsequently announced our commitment to achieve long-term, science-based targets on climate change, including the goal to reduce our own carbon emissions by 50% by 2030 and a new goal to reduce emissions from our overall value chain by 15%," Muller said.