Sustained strength from Ahold Delhaize's Food Lion banner helped propel the company to a strong first quarter.
A varied assortment may be important to consumers, but in another sense, diversification is crucial for retailers in today’s competitive market. That’s a key takeaway from Ahold Delhaize’s first quarter financial report, which shows that the company’s focus on giving shoppers more choices through the omnichannel and across its banners’ product mix is proving effective.
It was a solid Q1 for the global company as group net sales grew 6.3% to reach 21.6 billion euros, or $23.8 billion U.S. dollars. In the United States, net sales rose 5.7% at constant exchange rates to top $14.8 billion. Comp sales were up 6.2% at Ahold Delhaize's American stores, while underlying operating margin here was 4.8% at constant exchange rates.
Although inflation, currency rates and other factors like calendar shifts and weather impacted the financials, the latest report reveals a resilient U.S. grocery business for the Netherlands-based parent company. Food Lion turned in its 42nd straight quarter of positive sales growth in the opening months of this fiscal year. The Hannaford banner has gained market share for seven straight years since 2016, Ahold Delhaize noted in its report.
“The U.S. brands continue to deliver consistent and strong performance,” said Frans Muller, president and CEO of Ahold Delhaize. “We also delivered a strong underlying operating profit, driven by better shelf availability, as supply chains are much improved compared to a year ago. It is clear that customers are finding great value through our brands’ various omnichannel propositions.”
Muller underscored the mantra of serving shoppers in as many relevant ways as possible, especially in a high-inflation era that has sparked renewed interest in value and store brands. "Our brands' ability to adapt their assortments and omnichannel customer journeys to rising consumer price sensitivity is resonating well with customers, and this is clearly reflected in our Q1 results,” he remarked.
Those results indicate that shoppers at U.S. banners continue to buy both in-store and online. Online sales in the U.S. climbed 11.9% in Q1, with robust 20% e-commerce growth at Food Lion and The Giant Co. That pace of growth was due in part to those grocers’ new click-and-collect locations that opened during the period. Ahold Delhaize also pointed to Giant Food’s second e-commerce distribution center that recently expanded delivery access for customers in its footprint.
“A full-fledged, fully-integrated 360-degree digital shopping experience is no longer a ‘nice to have’ – it’s a must have, and our foundation here is strong,” asserted Muller during the Q1 earnings call.
Store updates are another distinguishing factor in a competitive retail market, the company emphasized. “There is no doubt that store modernization plans across the entire fleet of Food Lion stores from 2014 to 2021 contributed significantly to the 42 consecutive quarters of store sales growth,” Muller said.
Food Lion is working on a new wave of projects through its omnichannel remodeling program, with more than 70 store refreshes planned for this year. Another example highlighted in the earnings call was Stop & Shop’s remodeled locations in New York City, which continue to exceed expectations with double-digit sales growth.
CFO Natalie Knight said that ongoing growth and updates across Ahold Delhaize’s banners also speak to the organization’s efforts to deliver on shoppers’ diverse needs and interests. “As we go forward, our big focus is on how we make the stores more omnichannel and how we increase the sustainability aspect, so people feel that fresh, affordable and simple ways of shopping, which is part of the core of how we approach the market,” she explained.
In its financial report, Ahold Delhaize reiterated its outlook for the fiscal year, with the underlying operating margin expected to be greater than or equal to 4%. Added Muller: “In the U.S., our brands are well positioned as inflation levels start to moderate.”