Ahold Delhaize sees strong US Q1 results with omnichannel, remodeling efforts

Dive Brief:

Ahold Delhaize’s first quarter of 2023 saw a robust financial performance in the U.S., with comparable-store sales excluding gasoline increasing 6.2% compared with the same period in 2022 and net sales of 13.5 billion euros ($14.2 billion) stateside, the company reported Wednesday.
For its U.S. banners, e-commerce sales for the Dutch grocery conglomerate increased 11.9% during the quarter compared to the prior year with online penetration grocery rates increasing 40 basis points to 8.5%.
Ahold Delhaize President and CEO Frans Muller told investors that Ahold Delhaize is focused on omnichannel innovation: “A fully fledged, fully integrated 360-degree digital shopping experience is no longer a nice-to-have. It’s in the meantime a must-have and our foundation here is strong.”

Dive Insight:

Despite economic headwinds in Europe, Ahold Delhaize managed to surpass investors’ expectations thanks in large part due to its financial success in the U.S.

Muller said that Ahold Delhaize gained market share “in most of our markets.” Hannaford, for example, has gained market share for seven consecutive years since 2016, per an earnings presentation.

During Q1, for its underlying operating margin, Ahold Delhaize recorded a decrease of 0.2 percentage points, to 4%, globally and an increase of 0.4 percentage points in the U.S. Ahold Delhaize’s operating margin decrease in Europe was primarily due to energy costs more than tripling from their 2021 levels and strikes in Belgium, outgoing CFO Natalie Knight, who is leaving the company this summer to pursue a job in the U.S., said on the call.

“Excluding these two limited-duration impacts, underlying operating margins modestly exceeded prior year levels,” Knight said.

Muller said the company’s U.S. banners, which include Giant Food, Hannaford, The Giant Company, Stop & Shop and Food Lion “continued to deliver consistent and strong performance,” noting the company has seen better shelf availability due to supply chain improvements and positive customer response to its omnichannel efforts.

“The percentage of completely new customers to ADUSA brands in new sign-ups is also rising — a telltale sign of how important the digital ecosystem is becoming when consumers begin looking for value across the competitive set,” Muller said.

During Q1, Ahold Delhaize rolled out native mobile apps at The Giant Company and Giant Food, with Stop & Shop to follow suit in Q2, and Giant Food opened its second e-commerce distribution center to expand delivery access.

This year, Ahold Delhaize is looking to make more progress with the rollout of its “Prism” platform — the name of its proprietary software for internal e-commerce, Muller said. The company is on track to migrate Food Lion to the Prism platform in Q2, part of what Muller described as a plan to build “deeper digital relationships at scale.”

Following its successful remodeling program that unfolded between 2014 and 2021, Food Lion is now beginning a multiyear wave of remodels under its omnichannel remodel program starting with more than 70 stores this year, with the first 29 slated to be done this month in Wilmington, North Carolina, Muller said.

Knight said customers for the U.S. banners are finding “great value” through the various omnichannel options.

“In 2023, we are also speeding up some of our big initiatives within our omnichannel ecosystem, monetization and mechanization, which I’m convinced will drive long-term competitive advantage and benefits for our customers,” Muller said.

Personalized offers is another key area of focus for the company, which delivered more than 2.7 billion personalized offers in Q1 alone, Muller said.

With customers looking to stretch their wallets amid ongoing inflation, the company is focused on “a rational pricing environment” with promotions, Muller said. Inflation has also led to increased private label sales, Muller said.

Store remodels have also been a main focus stateside. Food Lion’s store modernization plan has contributed “significantly” to the 42 consecutive quarters of comp store sales growth, Muller said.

Ahold Delhaize is almost halfway done with its Stop & Shop remodels, with roughly 170 out of 400 converted, Muller said. At Stop & Shop, those remodels have driven strong sales momentum, Knight said. Remodeled Stop & Shop stores in New York City continue to exceed expectations, posting double-digit sales growth.