Supermarket conglomerate Ahold Delhaize has logged what it called a “solid” second quarter of 2018, with overall higher sales and margins despite the unfavorable timing of the Easter holiday, as well as strong earnings and free cash-flow growth. What’s more, exciting initiatives are in the offing, as the company teased a “fresh new format” slated to roll out later this year at its Stop & Shop banner in the United States, which has seen disappointing sales of late.
“During the second quarter of 2018, our business continued to perform well, and we remain on track with the execution of our strategy, building great local brands and strengthening our leading positions in our major markets, both in our stores and online,” said Frans Muller, CEO of Zaandam, Netherlands-based Ahold Delhaize. “Second-quarter sales rose 0.9 percent at constant exchange rates, and 2.4 percent adjusted for Easter and remedy stores [locations agreed to be divested as part of the 2016 approval of the merger between Ahold and Delhaize by the U.S. Federal Trade Commission] sold in 2017. Net consumer online sales grew 23 percent across the group, keeping us on pace to realize nearly €5 billion (US $5.8 billion) in online consumer sales by 2020.”
U.S. Achievements, Setbacks
Ahold Delhaize’s Q2 net sales in the United States dipped 0.3 percent at constant exchange rates to €9,211 million (US $10.7 billion); adjusted for the timing of Easter, they edged up 0.8 percent, and 1.4 percent, including the adjustment for the remedy stores sold over the course of 2017. Comps excluding gas declined 0.1 percent (adjusted for the timing of Easter, they grew 1.0 percent). Price inflation in the quarter was 1.6 percent, which the company attributed to a lower level of promotional activity versus last year. U.S. online sales rose 7.7 percent at constant exchange rates to €182 million (US $211 million), thanks to growth in same-day third-party delivery and the Hannaford to Go service.
Also during Q2, Ahold Delhaize USA launched Peapod Digital Labs, which, according to Muller, “will drive innovation, expertise and accelerate growth by creating a shared ecommerce infrastructure for all of our brands in the United States. To that end, the new organization will oversee the Chicago-based Peapod e-grocery division. Ahold Delhaize USA will start to build out Peapod Digital Labs in the next few months, with the expectation that it will be up and running by the end of the year.
Among Ahold Delhaize USA's banners, Food Lion experienced its 24th consecutive quarter of volume growth. Further, the Salisbury, N.C.-based banner’s sales were boosted by the opening of three former Farm Fresh stores in Virginia and two of the four acquired former Bi-Lo stores in South Carolina.
At Scarborough, Maine-based Hannaford, meanwhile, almost 1 million customers are now enrolled in the My Hannaford Rewards program, which contributed to positive volume growth in Q2.
Ahold Delhaize acknowledged, however, that volumes were “challenged” at its other U.S. banners, in particular Stop & Shop. With its brand-centric strategy now in place, however, Ahold Delhaize said that it anticipated improved sales trends in the United States in Q3.
Carlisle, Pa.-based Giant/Martin’s revealed a new ecommerce facility in Pennsylvania’s Lancaster County that will serve as a grocery delivery center and offer curbside pickup orders, in addition to featuring a walkable pickup point to meet rising local demand for online grocery.
Landover, Md.-based Giant Food successfully relaunched its prepared food category, which is now showing “encouraging growth,” Ahold Delhaize said.
Underlying operating margin in the United States was 4.0 percent, a 0.1 percentage-point increase from the year-ago period, which the company noted was because of “continued synergy savings and our ‘save for our customers’ programs, mainly offset by inflation on wages and transportation costs.”
Muller promised to provide more details on Peapod Digital Labs and the new Stop & Shop format at Ahold Delhaize’s Capital Markets Day, scheduled to take place on Nov. 13 in New England.
As part of the company’s ongoing commitment to delivering net synergies of €500 million in 2019 following the integration of Ahold and Delhaize, net cumulative synergies came to €199 million in the first half of 2018, a €82 million (US $95 million) increase from last year. Ahold Delhaize said that the increase was “mainly driven by our buying activities across all parts of the group.” In Q2, the company’s U.S. chains realized net synergy savings of €67 million (US $78 million).
Ahold Delhaize USA is No. 4 on Progressive Grocer’s 2018 Super 50 list of the top grocers in the United States.