Deflation Abates, Weis Markets, Ahold Delhaize Post Profit Gains

Print Friendly

Two of the Northeast’s, largest retailers, Ahold Delhaize and Weis Markets, posted strong earnings in their respective second quarters ended last month.

At Ahold Delhaize, the Amsterdam-based merchant said that an improvement in sales and merger synergies helped create higher margins and improved profits.

And at Sunbury, PA-based Weis, the publicly-traded closely-held operator continued its strong overall performance which began in 2014. In the 13-week period, Weis’ operating income increased 15.2 percent to $27.7 million compared to $24.1 million for the same period in 2016. The retailer’s second quarter net income increased 21.0 percent to $18.5 million while earnings per share totaled $0.69 compared to $0.57 in 2016.

Aided by the acquisition of 38 former Food Lion units and five Mars Super Markets last year, the regional chain saw overall sales climb 20 percent $876.6 million compared to $730.4 million for the same period in 2016. Weis second quarter comparable store sales, adjusted down for the Easter holiday shift, increased 2.7 percent.

“Our comparable stores have now increased for the 13th consecutive quarter,” said Weis Markets chairman and CEO Jonathan Weis. “During this period our sales and net income benefited from the strong performance of our pharmacy and deli-food service departments, sustained and varied promotions throughout our seven-state market area and increased store level efficiencies and expense controls.”

For the 26-week period ended July 1, 2017, sales increased 17.7 percent to $1.7 billion compared to the same period in 2016 while comparable store sales were up 1.7 percent. Operating income totaled $48.0 million compared to $55.3 million in 2016.

“They’re on a good run right now,” said an executive with a large supermarket chain which competes with Weis. “Jonathan and Kurt (Schertle) are providing strong leadership. They’ve modernized their stores, made some strategic acquisitions which they could integrate into their base of stores, are aggressive marketers, and perhaps most importantly, have created a positive atmosphere for the associates.”

As for Ahold Delhaize, CEO Boer said: “We are pleased to report a strong set of results. Sales improved across the board and the group underlying operating margin increased by 30 basis points to 3.9 percent as merger synergy savings continued to track ahead of projections.

“A year after the merger between Ahold and Delhaize, the integration of the two companies is fully on track and delivering results as we continue to focus on strengthening our local brands through our ‘Better Together’ strategy. We expect to achieve gross synergies of $881.4 million by 2019, of which $293.8 million will be reinvested in our brands.

“We look toward the second half of the year with confidence and expect our underlying operating margin for the full year 2017 to be broadly in line with the first half of the year, with $258.5 million net synergies for 2017.

“We have a successful omni-channel strategy in place that combines a thriving network of brick-and-mortar stores with leading online businesses. We are accelerating investments in our e-commerce operations to further unlock their promising growth potential. We expect close to $3.5 billion of online consumer sales in 2017, putting us on track to achieve nearly $5.9 billion by 2020.

“In the United States, our sales performance improved with returning inflation, while margins expanded on the back of strong synergy savings. Our U.S. brands are well-placed in a fast-changing competitive landscape. We continue to improve the price positioning of our Ahold USA brands and have developed effective competitive plans for Food Lion, facing new competition (Lidl).

“In the United States we are making good progress in setting up Retail Business Services (RBS), combining scale and building expertise in own brands, digital and IT. Additionally, we are implementing a brand-centric operating model to strengthen local competitiveness in our markets and we expect a one-off restructuring charge of $82.3 million related to this, mainly in 2017.

“The Netherlands reported another strong quarter with robust sales growth in both supermarkets and e-commerce. Albert Heijn continues to improve and innovate its assortment, providing a fresh and healthy offering and more convenient solutions for customers. We are proud that was recognized as the strongest retail brand in the Netherlands, for three years in a row.

“We continue to return excess capital to shareholders through our ongoing share buyback program of $1.2 billion, which we expect to complete by the end of 2017. Furthermore, we reiterate our guidance of $1.9 billion free cash flow for the year after $2.1 billion in capital expenditure.”

Ahold Delhaize said it remains committed to delivering net synergies of $587.6 million in 2019, incremental to underlying operating income, resulting from the integration of the two companies. It said it expects synergies to be delivered in addition to the “save for our customer” programs in the brands.

The multi-national merchant said programs to strengthen its relationships with A-brand suppliers have been completed for 2017. In Europe and the United States, the company said programs with suppliers of “own” brand and fresh products are progressing well and Not For Resale savings are in line with expectations. Overall procurement synergies are exceeding the original plan.

Integration of the two corporate head offices into one Global Support Office resulted in synergy savings of $16.5 million in the first half of the year. In the United States, the creation of RBS will enable efficiencies in back office and support functions and build retail expertise in own brand, digital and IT, which will be available to all U.S. brands.

Integration costs initially estimated at $416.3 million are expected to increase to $446.5 million to support the additional sourcing synergies.