Taking Stock

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Ahold Delhaize Comps Dip In U.S.; Earnings Rise, Synergy Savings On Track

In reporting its first quarter 2017 sales and earnings (ended April 2), the newly formed Ahold Delhaize organization continued its recent pattern at the nearly 2,000 U.S. supermarkets it operates of strong earnings and slightly negative comp store sales.

At its 776-store Ahold USA division, the company’s underlying operating margin remained at a healthy 4.2 percent, earning $270.4 million in underlying operating profit. Comp store revenue (ex-gas) dipped to negative 1.8 percent (compared to negative 1.4 percent in the period a year earlier). The company cited continuing deflation, adverse weather and the timing of Easter as contributing factors for the declining comp store performance at its 776 stores. Overall sales at AUSA in the quarter were $6.4 billion.

At Food Lion and Hannaford’s 1,214 stores, underlying operating margin was 3.9 percent and underlying operating income was $166.1 million for the quarter. Comps, which were positive 2 percent in Q1 2016, were flat this period. Overall sales at Delhaize America were $4.2 billion.

Synergy savings-wise, Ahold Delhaize said it is on track to deliver its projected $543 million amount by 2019. In the U.S., the big retailer said $38 million in synergy savings had been delivered during the first quarter.

“We are pleased to report a resilient first quarter performance with an increase in margin for the group despite the ongoing deflationary environment in the United States,” said CEO Dick Boer. “We continue to make significant progress on the implementation of our ‘Better Together’ strategy, investing in our customer proposition, while improving margins.”

In the post-earnings release conference call in Amsterdam, Boer said the company was focusing on improving its center store strategy following improvements of its perishables departments over the past two years as part of its “Operation Thunder” program. “We’re optimizing our product ranges and we look at our space allocation per store to max all their needs and provide a distinct offer for our customers. That’s really working on improving the center store offer for our customers,” Boer told the analysts.

The veteran Ahold executive also addressed the question of the future of bfresh, which since its debut two years ago still has only three stores in operation (although there are four more stores planned), noting that it will decide on a small store rollout strategy later this year. He added that the bfresh model and Hannaford’s new small format (which debuted in N. Berwick, ME in 2015) are right for the market and represent a “nice opportunity for us.”

In assessing the upcoming threat from Lidl’s U.S. debut next month, Boer said that its Food lion unit is ready for the battle. “We know exactly where they will come,” he said.