Dive Brief:
- Ahold Delhaize’s performance in the U.S. sagged during the second quarter of fiscal year 2024 compared with the same period a year ago, with declines in several financial metrics, the company reported Wednesday.
- Stateside, the company’s net sales at constant exchange rates were down 1.5% to 13.5 billion euros (about $14 billion) while its comp-store sales excluding gasoline dipped 0.4%.
- The timing of Easter and the Fourth of July hurt U.S. sales in Q2 as well as the sale of e-grocer FreshDirect to rapid delivery firm Getir, Ahold Delhaize noted.
Dive Insight:
Ahold Delhaize’s Q2 results continued the company’s U.S. net sales declines seen in recent quarters.
However, Ahold Delhaize saw volume trends continue on “a positive trajectory” stateside in Q2, Ahold Delhaize President and CEO Frans Muller told investors. The U.S. banners are “laser-focused” on investing in customer value proposition, Muller added, pointing to the “Compare & Save” campaigns at Stop & Shop and Giant Food, which he said are “trending favorably with higher sales, in both dollars and units.”
Ahold Delhaize’s Food Lion and Hannaford banners continue to lead the U.S. brands’ performance, with 47 and 12 consecutive quarters of positive sales growth, respectively, the grocery company reported.
While Ahold Delhaize’s online sales in Europe surged more than 9% during Q2, its digital sales dropped nearly 3% stateside. The grocery company said that its divestment of FreshDirect hurt its overall online sales by 8 percentage points but that double-digit growth at Food Lion, Hannaford, The Giant Company and Albert Heijn helped offset the impact.
“As growth rates in the industry normalize, our omnichannel ecosystems are proving a major competitive advantage and source of market share gains,” Muller told investors Wednesday, noting that the company is seeing new customer growth and strong customer retention with online sales.
“In the U.S., the shift in demand to more profitable channels and our initiatives to optimize the store-first fulfillment model are paying off,” he added.
The company said its underlying operating margin in the U.S. was up 0.1 percentage points, to 4.7%, due to higher vendor allowances and cost-savings initiatives implemented over the past 12 months, including the FreshDirect sale.
During Q2, Ahold Delhaize unveiled its Growing Together strategy, which shared financial goalposts for 2028, such as achieving a 4% net sales compound annual growth rate and increasing private label share towards 45% of total store sales. The strategy also outlined six strategic priorities, including customer experience, customer innovation and a “healthy and sustainable food system.”
For its 2024 outlook, Ahold Delhaize noted that it expects the FreshDirect divestment to reduce net and online sales in the U.S. by $600 million and that the planned closures of 32 Stop & Shop stores by the end of the year will impact net sales between $100 million to $125 million as well as a non-recurring pre-tax charge of between $160 and $210 million next quarter. The following year, the company anticipates a net sales impact between $550 million to $575 million from the Stop & Shop closures.
“By creating a healthy store base, the team at Stop & Shop will be able to focus attention on the markets that are most important, including those where the brand has strong density, holds a strong market position or has stores that are performing well,” Muller told investors.
