Taking Stock

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Ahold Delhaize, Weis Post Strong Comps, Solid Earnings

Two of the region’s largest supermarket chains, Ahold Delhaize USA and Weis Markets, enjoyed profitable first quarters while also increasing identical store sales.

Earlier this month, Weis Markets reported its first quarter sales increased 2.8 percent to $876.1 million compared to the same period in 2017 while comparable store sales, adjusted for the holiday shift, increased 1.5 percent.

During the 13-week period ending March 31, 2018, the company’s net income increased 36.8 percent to $16.2 million compared to $11.8 million for the same period in 2017 while first quarter earnings per share increased 36.4 percent to $0.60 compared to $0.44 in 2017. The Sunbury, PA based retailer’s first quarter operating income increased 12.8 percent to $22.8 million.

First quarter sales benefited from the holiday shift since the Easter sales week occurred in the last week of the first quarter while the slow post-Easter sales week occurred in the second quarter. In 2017, both the Easter and post-Easter weeks fell in the second quarter.

“Our operating income was positively impacted by store improvements in overall efficiency levels, particularly with inventory management, which resulted in an improved store gross profit rate and our 16th consecutive quarter of comparable store sales increases,” said Jonathan Weis, Weis Markets’ chairman and CEO. “Our operating income also benefited from store labor efficiencies, in which multiple winter weather events were a contributing factor, and improvements to some of our key marketing and advertising programs. We look to build on our momentum in the coming months.”

At the regional chain’s annual shareholder’s meeting on April 26, 2018, Weis also announced a $101 million growth plan for the construction of two new stores, 20 remodels, four pharmacies and one fuel center. The first new store opened in Nottingham, MD on April 12. The company has also expanded and upgraded its “Weis 2 Go” online ordering service with curbside pick-up. It recently introduced this service in 25 additional stores and currently offers it in 79 locations.

Also earlier this month, Ahold Delhaize reported another strong quarter with solid sales growth and higher margins, resulting in marked growth of operating income and strong growth of net income at constant exchange rates.

Dick Boer, CEO of Ahold Delhaize who will retire in July, said: “We are pleased with our performance during the first quarter, proving that the execution of our ‘Better Together’ strategy continues to bear fruit, delivering sales growth and synergies throughout the business. Benefiting from our scale and building on our leading positions on the U.S. East Coast and in Europe, our great local brands demonstrated their capabilities and agility to meet rapidly changing consumer needs and preferences. First-quarter sales rose 2.5 percent at constant exchange rates to € 14.9 billion ($17.6 billion), supported by a solid performance in our brick-and-mortar stores and ongoing strong growth of online businesses. Our underlying operating margin expanded to 4.0 percent from 3.8 percent in the same period last year, primarily driven by synergies. Net consumer online sales grew 23 percent across the group, maintaining our momentum to realize nearly euro 5 billion ($5.89 billion) in online consumer sales by 2020. The U.S. brands (banners), which are reported as one segment as of January, reported improved comparable sales growth excluding gasoline of 2.8 percent, supported by the favorable impact of holidays and some weather impact. Its U.S. underlying operating margin rose 30 basis points to 4.3 percent, driven by synergies and with our “save for our customers” program offsetting cost inflation. In a competitive market with new entrants, Food Lion reported its 23rd consecutive quarter of comparable volume growth, as its “Easy, Fresh and Affordable” program is now deployed in more than 500 of its stores. Furthermore, online sales grew 9 percent across all U.S. brands.”

In the first quarter of 2018, net sales in the United States increased by 2.1 percent, at constant exchange rates, to $10.4 billion. Overall sales growth, excluding gasoline, was 1.9 percent. Price inflation was 2.3 percent, cycling a deflationary first quarter last year.

Online sales in the U.S. increased by 9.4 percent at constant exchange rates to $213.4 million, driven by Peapod, the further expansion of the online service “Hannaford To Go” and by same day, third-party delivery. Giant/Martin’s sales continued to benefit from the growth of its in-store beer and wine eatery sites, resulting in an increase of transactions, driving comparable sales growth of 3.6 percent this quarter.

Food Lion announced in the quarter that it has agreed to purchase three Farm Fresh stores in the greater Norfolk market in Virginia. It will also invest $168 million to remodel 105 stores in the Hampton roads area including some in eastern North Carolina. In addition, it plans to acquire four Bi-Lo stores, further strengthening its position in South Carolina.

Hannaford has rolled out its digital My Hannaford Rewards program chainwide this quarter, offering participating customers a reward on more than 5,000 own brand products, as well as personalized coupons for national and regional brand products.

Peapod lowered thousands of prices on products that matter most to customers and has expanded its meal kit line to include new recipes and introduced a discounted midweek subscription for PodPass customers.