Company raises outlook for the full year
ZAANDAM, the Netherlands — Ahold Delhaize’s net sales increased 9.1% at constant exchange rates to €22.4 billion ($22.42 billion). At actual exchange rates, net sales grew 20.8%, the company said on Wednesday.
Comparable store sales (including gasoline) grew faster in the third quarter than they had in the second, growing 8.2% in the U.S. and 7.4% in Europe. The company also reported that diluted underlying earnings per share increased 31.6% over the prior year at actual rates, hitting €0.70.
“Empowering customer choice by providing great value and easy access to affordable and healthy food options is at the center of the customer value proposition in all of our nineteen great local brands,” Ahold Delhaize president and CEO Frans Muller said. “Our positive market share development and resilient financial performance in Q3 highlights the trust customers continue to place in our brands. I am proud of these results and of our associates who consistently rise to meet the demands of these challenging times.
“High inflation, increasing interest rates, slowing economic growth and the war in Ukraine are putting intense pressure on customers’ household budgets. At the same time, retailers and suppliers alike are also facing rising costs of doing business. High energy prices, for example, are not just a cost headwind but are also disrupting supply chains, which are still fragile in many parts of the world. With a deep understanding of commodity prices, built through our extensive experience with own-brand products, our teams play an important role in the value chain and work hard on behalf of customers to ensure realistic pricing. In the face of increasing price pressures, it is everyone’s job, across the value chain, to keep prices as low as possible for customers. To this end, we continue to engage diligently and proactively with partners, making clear choices on assortment when necessary. We are also adapting our organization and processes to rising costs by increasing efficiencies and mitigating costs wherever practical and possible.”
Muller noted that while the company cannot control such factors as energy prices, it is making progress in areas where it can have an impact.
“For example, at Stop & Shop, we continue to advance on our remodeling program, with over 40% of the store fleet now remodeled since 2018. An important focus area for Stop & Shop is New York City, where we announced a multi-year $140 million investment earlier this year. With the first five store remodels completed, we are encouraged to see all stores trending ahead of plan, with the sales lift driven by increased units and new customer transactions. In addition, the introduction of Stop & Shop’s new Deal Lock savings program, which helps customers capture value by locking in a specific sales price for multiple weeks on both national and private brands, is delivering strong early chain-wide results. Delhaize Belgium also saw a material improvement in comparable store sales supported by the first full quarter of its Little Lions everyday low price program and enhancements to its SuperPlus initiative. At bol.com, net consumer online sales were up 5.6% in Q3, with a market share gain of well over one percentage point year to date. This was driven by double-digit growth in third-party partner network sales. And while the market is still challenging, the brand is well positioned to maximize the holiday season opportunity, supported by ‘The Big Toy Book’ and the logistical strength of its new distribution facility, which opened earlier this year.
“Taking a step back and looking at the big picture, I am equally encouraged about our progress on the key levers of our Leading Together strategy. Our omnichannel transformation is central to this strategy, driven by customers’ desire to shop whenever and wherever they want. In Q3, net consumer online sales increased by 11.5%. Our online grocery sales were up 16.9% with strong growth in both regions as we continued to invest in new and innovative high-tech omnichannel solutions. Our Save for Our Customers cost savings program remains on track to produce savings of more than €850 million in 2022. These annual programs help our great local brands absorb cost increases to invest in better customer propositions and to keep shelf prices as low as possible. On another of our strategic initiatives, to generate €1 billion in complementary revenues by 2025, we also took important steps to bolster our digital advertising capabilities. We announced the acquisition of a minority stake in Belgian adtech company Adhese, which will provide an important part of the tech stack and third-party integration to help scale our capabilities and increase services for advertisers and publishers in Europe. In the U.S., Peapod Digital Labs announced plans to build an end-to-end, in-house retail media business, building on the existing AD Retail Media network. With this step, Ahold Delhaize USA creates a simplified way to engage omnichannel customers at the largest grocery retail group on the East Coast.
“We believe it is important to continue to make progress on elevating our Healthy and Sustainable strategy during these challenging times. It is clear from the science that more structural actions are needed to combat climate change, and we are encouraged to see that the current energy crisis is stimulating creative thinking and driving the transition to renewable energy. Our brands continue to work hard to bring meaningful initiatives to customers in stores and online. We are well on track to again deliver on key milestones related to growing our share of healthy sales, decreasing food waste and reducing the carbon emissions of our own operations. We believe that every step, no matter how big or small, counts. And our brands continue to show that it is not just about the numbers, there is real customer benefit as well. For example, Albert Heijn recently introduced its ‘Leftovers’ program to reduce food waste but also provide value to customers by enabling them to buy products approaching ‘best by’ or ‘expiry’ dates at lower prices. Our Albert brand in the Czech Republic became the first retailer to test a hydroponic system that grows herbs and leafy vegetables on the sales floor and also introduced a zero waste kitchen, turning leftover food from three stores into meals for over 100 associates.
“In conclusion, despite increasing macro-economic and geopolitical challenges, we continue to make important progress on delivering our strategy. Better-than-expected underlying U.S. results, foreign exchange benefits, and continued insurance gains from rising interest rates allow us to raise our full year diluted underlying EPS guidance to low-double-digit growth. Operational excellence, tight cost control and disciplined capital allocation continue to be important in these times. As such, we are working hard on a variety of initiatives across the company to maintain our industry-leading position of consistent and reliable performance, dependable cash flows and shareholder returns. This is a track record we are proud of, and, in light of our continued expectations of strong free cash flow generation going forward, we are announcing the continuation of our annual share buyback program in 2023. As always, striking the appropriate balance between supporting our associates, investing in our customers and local communities, prioritizing our digital and omnichannel transformation and playing our part in the transition to a healthy and sustainable food system will guide our decision-making. Our proactive culture, our scale and our agility position us well – a testament to the strength of our company and our business model.”