Taking Stock

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Ahold USA Completes Integration Assignments; New Decentralized Model To Be Launched January 1

With the completion of its “Wave C” round of interviews and future job assignments affecting associates in IT, legal, people systems and services, finance, supply chain and communications, Ahold USA is now ready to debut its new decentralized operating model on January 1, 2018.

The new structure places priorities on its brands (banners) and on its Retail Business Services (RBS) unit, which was created earlier this year to oversee administrative functions. Those who made the cut in “Wave C” will be part of RBS. At the brand level, “Wave C” focused on human resources, finance, fresh formats and quality assurance.

With all Ahold USA personnel now assigned, I’m wondering how long after January 1 it will take for all of the company’s newly rearranged pieces to flow effectively. Remember, this is radical change designed to make the organization more efficient and productive. Not only are there a lot of moving parts to consider, AUSA is making those changes in a culture where morale is mediocre at best. The best measuring stick to me has always been same store sales so we’ll continue to monitor that. And as I’ve written before, once the one-time overall Ahold Delhaize corporate synergy savings of $550 million are utilized (by early 2019) and the new structure is road tested, it will be of interest to watch if AUSA can actually sell more stuff.

And speaking of selling more stuff, Ahold Delhaize reported strong earnings and improved ID sales in its recently competed third quarter. Overall, the Amsterdam-based merchant posted a sales increase of 7.4 percent and earnings jumped 54 percent to $419.3 million. In the U.S., at Ahold USA, net sales declined 6.1 percent (the company operated 12 fewer stores), but comps (excluding fuel) grew slightly to 0.7 percent compared to negative 0.1 in the corresponding period last year. Earnings remained strong with operating income increasing 35.4 percent to $199 million and underlying operating margin rising to 4.1 percent from 3.9 percent.

At Delhaize America, net sales jumped 22.4 percent and operating profit also increased 28.2 percent to $132 million. Buoyed by its “Easy, Fresh & Affordable” remodeling effort, comp store sales were 2.3 percent compared to last year’s third quarter figure of 1.3 percent.

There’s no question that Ahold Delhaize is a profit beast and should produce stellar earnings for the next six quarters as it takes full advantage of the synergies created by the AD merger which was completed last year. But at AUSA, comps should be better and once again, I find myself wondering if the company will ever devote more resources to improving its stores and ultimately its customer engagement experience? With such great locations, strong programs like “Project Thunder” and a well-developed strategy to maximize earnings it should be doing better with its top line revenue and could be doing a lot more to improve the morale of many of its associates.

We also learned that Hanneke Faber, chief commerce and innovation officer for Ahold Delhaize will leave the company next month to pursue career opportunity, reportedly with another Dutch firm – Unilever (she formerly worked for P&G). Faber joined Ahold in 2013. A search has begun for Faber’s successor who will likely oversee the chain’s rapidly evolving digital model.