Logging ‘Solid’ Q2, Ahold Delhaize Looks to New Strategy for Continued Growth
For its second quarter, Ahold Delhaize reported group net sales of €22.3 billion (USD $24.3 billion), a 0.7% increase at constant exchange rates and up 1.2% at actual exchange rates. According to the retail conglomerate, its group net sales were spurred by comparable-sales growth, excluding gasoline, of 0.6% and net store openings, including the conversion of Jan Linders stores. Group net sales growth was partly offset by the divestment of FreshDirect and lower gasoline sales, however.
Q2 group comps, excluding gasoline, had a net negative impact of about 1.0 percentage point from calendar shifts, related to Easter and the Fourth of July, and a 0.7 percentage-point negative impact from the end of tobacco sales at own-operated supermarkets in the Netherlands, which was partly offset by an approximately 0.2 percentage-point positive impact from cycling prior-year strikes in Belgium.
Additionally, group online sales in Q2 grew by 3.4% at constant exchange rates, adversely affected by 8.0 percentage points because of the FreshDirect divestment. This was offset by double-digit growth at Food Lion, Hannaford and The Giant Co. in the United States, and Albert Heijn in the Netherlands.
“I am pleased to report a second-quarter performance that places us well on track to achieve our strategic aspirations and financial goals for 2024,” noted Ahold Delhaize President and CEO Frans Muller. “It has been a busy quarter, as we launched our refreshed company strategy, Growing Together, internally and externally. As I said in May, we have a strong foundation, and we are ready to set the pace for change in our industry. We believe we have a very compelling set of ambitions, which, on delivery, will yield strong growth for our company and our stakeholders.”
In the United States, Q2 net sales were €13.6 billion (USD $14.2 billion), a 1.5% decline at constant exchange rates and down 0.4% at actual exchange rates. U.S. comps, excluding gasoline, dipped 0.4%, and there was a net negative impact of about 1.2 percentage points from calendar shifts related to the timing of Easter and the Fourth of July. Robust growth in pharmacy was offset by moderating inflation rates, the FreshDirect divestment and lower gasoline sales. Food Lion and Hannaford continued to lead the U.S. brands’ performance, with 47 and 12 straight quarters of positive sales growth, respectively.
In Q2, U.S. online sales fell 2.9% in constant currency, negatively affected by 16.9 percentage points because of the FreshDirect divestment, partly offset, as noted above, by double-digit growth at Food Lion, Hannaford and The Giant Co.
“As growth rates in the industry normalize, our omnichannel ecosystems are proving a major competitive advantage and source of market share gains,” observed Muller. “In the U.S., the shift in demand to more profitable channels and our initiatives to optimize the store-first fulfillment model are paying off.”
Underlying operating margin in the U.S. in Q2 was 4.7%, up 0.1 percentage points thanks to higher vendor allowances and the benefit from cost savings initiatives implemented over the past 12 months, including the FreshDirect divestment. This was partly offset by higher store labor and hired service costs and lower sales leverage.
Ahold Delhaize’s chief executive also spoke about the recent changes at Stop & Shop driven by the parent company’s revitalized strategy.
“During our Strategy Day in May, we communicated that we would take decisive and deliberate actions to ensure a stable and thriving future for Stop & Shop,” explained Muller. “We’re moving forward confidently in three key areas. First, delighting customers through improvements to the customer value proposition and differentiation. Second, improving the cost structure. And third, optimizing the store portfolio. Regarding the latter, Stop & Shop will close 32 underperforming stores by year end. We expect to recognize a net impact to sales, in 2024, of between $100 million and $125 million and, in 2025, between $550 million and $575 million. We also expect to recognize a non-recurring pre-tax charge of between $160 million and $210 million in Q3 2024. By creating a healthy store base, the team at Stop & Shop will be able to focus attention on the markets that are most important, including those where the brand has strong density, holds a strong market position or has stores that are performing well."
According to Ahold Delhaize, its strong U.S. performance gives it opportunities to take further action in support of the Growing Together strategy in the second half of the year, “in particular, initiatives such as those we have just announced at Stop & Shop as well as other price investments we outlined in our new strategy,” said Muller. “With the economic environment remaining dynamic, focusing on our growth plan and keeping our own house in order will ensure we are well positioned to drive brand strength and market share growth in the coming periods.”
Other recent company highlights included a sponsorship with The Global FoodBanking Network to redirect surplus nutritious food to the needy, and the publication of the “2024 Human Rights Report,” which provides an update on Ahold Delhaize’s progress over the past two years on its Roadmap on Human Rights, as well as several major updates to its Standards of Engagement for suppliers and highlights of its brands’ initiatives to improve conditions for workers across the value chain.
Additionally, the company reiterated its 2024 full-year outlook, including underlying operating margin of ≥4.0%; underlying EPS at around 2023 levels; free cash flow of around €2.3 billion; and net capital expenditures of about €2.2 billion.
Ahold Delhaize USA is a division of Zaandam, Netherlands-based Ahold Delhaize, is No. 11 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America. PG also named the company one of its Retailers of the Century and one of its 10 Most Sustainable Grocers.
