Ahold Delhaize reports strong increase in Q3 sales and earnings, as
our great local brands' value proposition continues to resonate
well with customers
- With high inflation levels in the U.S. and Europe, our brands
are focused on helping customers efficiently manage their spending.
Supported by our €850 million Save for Our Customers cost savings
program, our brands are working with suppliers to mitigate cost
increases for customers, introducing more entry-priced products,
expanding high-quality own-brand assortments and delivering
personalized value through digital omnichannel loyalty
programs.
- Q3 Group net sales increased 9.1% at constant exchange rates to
€22.4 billion. At actual exchange rates, net sales grew 20.8%.
- Q3 comparable sales excluding gas accelerated in both regions
compared to Q2, growing 8.2% in the U.S. and 7.4% in Europe.
Increased market share in most of our brands' reflects strong
loyalty to our locally tailored customer value propositions.
- Net consumer online sales increased 11.5% at constant exchange
rates. Net consumer online sales in grocery increased 16.9% at
constant exchange rates, as we continue to invest in new and
innovative high-tech omnichannel solutions.
- Q3 underlying operating margin was 4.4%, in line with the prior
year. Strong underlying U.S. margins and continued insurance gains
from rising interest rates offset lower Europe margins which were
impacted by rising energy costs and challenging economic
environment.
- Q3 IFRS-reported operating income was €887 million and Q3
IFRS-reported diluted EPS was €0.59.
- Q3 diluted underlying EPS was €0.70, an increase of 31.6% over
the prior year at actual rates.
- Based on Q3 results, we are increasing our full year EPS
outlook. We now forecast low-double-digit 2022 diluted underlying
EPS growth versus the prior mid-single-digit guidance. The 2022
free cash flow outlook remains at approximately €2.0 billion, with
net capital expenditures expected to total approximately
€2.5 billion.
- Ahold Delhaize announces a new €1 billion share buyback program
to start at the beginning of 2023.
Zaandam, the Netherlands, November 9, 2022 – Ahold Delhaize, one
of the world’s largest food retail groups and a leader in both
supermarkets and e-commerce, reports third quarter results
today.
The interim report for the third quarter 2022 can be viewed and
downloaded at www.aholddelhaize.com.
Summary of key financial data
|
Ahold Delhaize Group |
The United States |
Europe |
€ million, except per share data |
Q3 2022 |
% change |
% changeconstantrates |
Q3 2022 |
% changeconstantrates |
Q3 2022 |
% changeconstantrates |
13 weeks 2022 vs. 2021 |
Net sales |
22,407 |
20.8 % |
9.1 % |
14,659 |
8.8 % |
7,747 |
9.6 % |
Comparable sales growth excluding
gasoline |
7.9 % |
|
|
8.2 % |
|
7.4 % |
|
Online sales |
2,086 |
20.2 % |
11.8 % |
1,071 |
20.8 % |
1,015 |
3.7 % |
Net
consumer online sales |
2,703 |
17.8 % |
11.5 % |
1,071 |
20.8 % |
1,632 |
6.1 % |
Operating income |
887 |
13.8 % |
2.0 % |
566 |
(9.3) % |
319 |
10.6 % |
Operating margin |
4.0 % |
(0.2) pts |
(0.3) pts |
3.9 % |
(0.8) pts |
4.1 % |
— pts |
Underlying operating income |
993 |
22.3 % |
9.7 % |
726 |
12.4 % |
264 |
(13.2) % |
Underlying operating margin |
4.4 % |
0.1 pts |
— pts |
5.0 % |
0.2 pts |
3.4 % |
(0.9) pts |
Diluted EPS |
0.59 |
16.6 % |
4.7 % |
|
|
|
|
Diluted underlying EPS |
0.70 |
31.6 % |
18.2 % |
|
|
|
|
Free cash
flow |
133 |
(74.2) % |
(77.4) % |
|
|
|
|
|
Ahold Delhaize Group |
The United States |
Europe |
€ million, except per share data |
Q3 YTD 2022 |
% change |
% changeconstantrates |
Q3 YTD 2022 |
% changeconstantrates |
Q3 YTD 2022 |
% changeconstantrates |
39 weeks 2022 vs. 2021 |
Net sales |
63,626 |
14.7 % |
6.4 % |
40,435 |
7.5 % |
23,190 |
4.6 % |
Comparable sales growth excluding
gasoline |
4.5 % |
|
|
6.0 % |
|
1.9 % |
|
Online sales |
6,173 |
11.7 % |
6.0 % |
3,025 |
13.5 % |
3,147 |
(0.5) % |
Net
consumer online sales |
8,086 |
9.0 % |
4.8 % |
3,025 |
13.5 % |
5,061 |
0.1 % |
Operating income |
2,601 |
7.2 % |
(0.9) % |
1,749 |
(1.0) % |
847 |
(11.9) % |
Operating margin |
4.1 % |
(0.3) pts |
(0.3) pts |
4.3 % |
(0.4) pts |
3.7 % |
(0.7) pts |
Underlying operating income |
2,702 |
8.4 % |
0.1 % |
1,902 |
3.6 % |
791 |
(18.9) % |
Underlying operating margin |
4.2 % |
(0.2) pts |
(0.3) pts |
4.7 % |
(0.2) pts |
3.4 % |
(1.0) pts |
Diluted EPS |
1.73 |
11.3 % |
2.9 % |
|
|
|
|
Diluted underlying EPS |
1.84 |
14.4 % |
5.7 % |
|
|
|
|
Free cash
flow |
708 |
(42.9) % |
(49.3) % |
|
|
|
|
Comments from Frans Muller, President and CEO of
Ahold Delhaize
"Empowering customer choice by providing great value and easy
access to affordable and healthy food options is at the center of
the customer value proposition in all of our nineteen great local
brands. Our positive market share development and resilient
financial performance in Q3 highlights the trust customers continue
to place in our brands. I am proud of these results and of our
associates who consistently rise to meet the demands of these
challenging times.
"Comparable store sales ex gas increased 7.9% in Q3, with an
acceleration in growth rates in both the U.S. and Europe to 8.2%
and 7.4%, respectively. The vast majority of our leading local
brands continue to gain or maintain market share. Notably, during
the quarter, our two biggest brands achieved significant
milestones. Food Lion reached a decade of consecutive quarters of
positive comparable sales growth, which is a remarkable
achievement. Albert Heijn continues to win market share by focusing
on providing value for customers in an increasingly challenging
environment. This quarter included a new, traffic-generating ‘100
items under one euro’ campaign as well as an expansion to 1,600
‘Prijsfavorieten’ (Price favorites), which include top-quality
own-brand daily products at affordable prices. Albert Heijn Premium
also passed the 600,000-member subscription mark this quarter.
"High inflation, increasing interest rates, slowing economic
growth and the war in Ukraine are putting intense pressure on
customers' household budgets. At the same time, retailers and
suppliers alike are also facing rising costs of doing business.
High energy prices, for example, are not just a cost headwind but
are also disrupting supply chains, which are still fragile in many
parts of the world. With a deep understanding of commodity prices,
built through our extensive experience with own-brand products, our
teams play an important role in the value chain and work hard on
behalf of customers to ensure realistic pricing. In the face of
increasing price pressures, it is everyone's job, across the value
chain, to keep prices as low as possible for customers. To this
end, we continue to engage diligently and proactively with
partners, making clear choices on assortment when necessary. We are
also adapting our organization and processes to rising costs by
increasing efficiencies and mitigating costs wherever practical and
possible.
"Building on strong sales growth, we delivered an underlying
operating margin of 4.4% and diluted underlying EPS growth of 31.6%
in Q3. Our results were again influenced by foreign exchange and
interest rate changes as well as other items. In the U.S., our 5%
underlying operating margin was positively impacted by 0.3
percentage points from the release of a provision on our
self-insurance program. This resulted from, among other things,
many years of strong efforts to improve workplace safety. In
Europe, our Q3 underlying operating margin showed a slight
improvement compared to Q2, despite a more pronounced impact from
rising energy and utility costs. Since we last communicated in
August, we have seen further increases in per-MwH prices, which
will continue to weigh on our European margins in the coming
quarters.
"On an IFRS-reported basis, our operating margin was 4.0%. There
were two main impacts that led to these results. First, we took an
impairment charge of €187 million on FreshDirect, which negatively
impacted the reported IFRS U.S. operating margin, largely related
to the broad based re-rating of sector valuations and reduced scope
of that business that is now predominantly focused on the New York
Tri-State area. And second, on an IFRS-reported basis, the European
operating margin benefited from the release of a wage tax provision
in Belgium amounting to €62 million.
"So, while we can't control external factors like energy prices,
we have continued to work diligently on things that are under our
control, and I am pleased we are making good progress. For example,
at Stop & Shop, we continue to advance on our remodeling
program, with over 40% of the store fleet now remodeled since 2018.
An important focus area for Stop & Shop is New York City, where
we announced a multi-year $140 million investment earlier this
year. With the first five store remodels completed, we are
encouraged to see all stores trending ahead of plan, with the sales
lift driven by increased units and new customer transactions. In
addition, the introduction of Stop & Shop's new Deal Lock
savings program, which helps customers capture value by locking in
a specific sales price for multiple weeks on both national and
private brands, is delivering strong early chain-wide results.
Delhaize Belgium also saw a material improvement in comparable
store sales supported by the first full quarter of its Little Lions
everyday low price program and enhancements to its SuperPlus
initiative. At bol.com, net consumer online sales were up 5.6% in
Q3, with a market share gain of well over one percentage point year
to date. This was driven by double-digit growth in third-party
partner network sales. And while the market is still challenging,
the brand is well positioned to maximize the holiday season
opportunity, supported by 'The Big Toy Book' and the logistical
strength of its new distribution facility, which opened earlier
this year.
"Taking a step back and looking at the big picture, I am equally
encouraged about our progress on the key levers of our Leading
Together strategy. Our omnichannel transformation is central to
this strategy, driven by customers' desire to shop whenever and
wherever they want. In Q3, net consumer online sales increased by
11.5%. Our online grocery sales were up 16.9% with strong growth in
both regions as we continued to invest in new and innovative
high-tech omnichannel solutions. Our Save for Our Customers cost
savings program remains on track to produce savings of more than
€850 million in 2022. These annual programs help our great local
brands absorb cost increases to invest in better customer
propositions and to keep shelf prices as low as possible. On
another of our strategic initiatives, to generate €1 billion in
complementary revenues by 2025, we also took important steps to
bolster our digital advertising capabilities. We announced the
acquisition of a minority stake in Belgian adtech company Adhese,
which will provide an important part of the tech stack and
third-party integration to help scale our capabilities and increase
services for advertisers and publishers in Europe. In the U.S.,
Peapod Digital Labs announced plans to build an end-to-end,
in-house retail media business, building on the existing AD Retail
Media network. With this step, Ahold Delhaize USA creates a
simplified way to engage omnichannel customers at the largest
grocery retail group on the East Coast.
"We believe it is important to continue to make progress on
elevating our Healthy and Sustainable strategy during these
challenging times. It is clear from the science that more
structural actions are needed to combat climate change, and we are
encouraged to see that the current energy crisis is stimulating
creative thinking and driving the transition to renewable energy.
Our brands continue to work hard to bring meaningful initiatives to
customers in stores and online. We are well on track to again
deliver on key milestones related to growing our share of healthy
sales, decreasing food waste and reducing the carbon emissions of
our own operations. We believe that every step, no matter how big
or small, counts. And our brands continue to show that it is not
just about the numbers, there is real customer benefit as well. For
example, Albert Heijn recently introduced its ‘Leftovers’ program
to reduce food waste but also provide value to customers by
enabling them to buy products approaching 'best by' or 'expiry'
dates at lower prices. Our Albert brand in the Czech Republic
became the first retailer to test a hydroponic system that grows
herbs and leafy vegetables on the sales floor and also introduced a
zero waste kitchen, turning leftover food from three stores into
meals for over 100 associates.
"In conclusion, despite increasing macro-economic and
geopolitical challenges, we continue to make important progress on
delivering our strategy. Better-than-expected underlying U.S.
results, foreign exchange benefits, and continued insurance gains
from rising interest rates allow us to raise our full year diluted
underlying EPS guidance to low-double-digit growth. Operational
excellence, tight cost control and disciplined capital allocation
continue to be important in these times. As such, we are working
hard on a variety of initiatives across the company to maintain our
industry-leading position of consistent and reliable performance,
dependable cash flows and shareholder returns. This is a track
record we are proud of, and, in light of our continued expectations
of strong free cash flow generation going forward, we are
announcing the continuation of our annual share buyback program in
2023. As always, striking the appropriate balance between
supporting our associates, investing in our customers and local
communities, prioritizing our digital and omnichannel
transformation and playing our part in the transition to a healthy
and sustainable food system will guide our decision making. Our
proactive culture, our scale and our agility position us well – a
testament to the strength of our company and our business
model."
Q3 Financial highlights
Group highlights
Group net sales were €22.4 billion, an increase of 9.1% at
constant exchange rates, and up 20.8% at actual exchange rates.
Group net sales were driven by positive contributions from
comparable sales growth excluding gasoline of 7.9%, foreign
currency translation benefits, and higher gasoline sales. Q3 Group
comparable sales benefited by approximately 0.2 percentage points
from the net impact of calendar shifts and weather.
In Q3, Group net consumer online sales increased by 11.5% at
constant exchange rates, led by a robust performance in the U.S.
and a return to growth in Europe, where the difficult
year-over-year comparisons that pressured first half results eased.
Net consumer online sales in grocery increased 16.9% at constant
exchange rates.
In Q3, Group underlying operating margin was 4.4%, consistent
with Q3 2021 at constant exchange rates, reflecting strong cost
savings and favorable insurance results, which helped offset higher
labor, distribution and energy costs. In Q3, Group IFRS-reported
operating income was €887 million, representing an
IFRS-reported operating margin of 4.0%.
Underlying income from continuing operations was
€696 million, up 27.3% in the quarter at actual rates. Ahold
Delhaize's IFRS-reported net income in the quarter was €589
million. Diluted EPS was €0.59 and diluted underlying EPS was
€0.70, up 31.6% at actual currency rates compared to last year's
results and 18.2% at constant currency rates. In the quarter,
7.1 million own shares were purchased for €188 million,
bringing the total year-to-date amount to €711 million through
the first nine months.
U.S. highlights
U.S. net sales were €14.7 billion, an increase of 8.8% at
constant exchange rates and up 27.4% at actual exchange rates. U.S.
comparable sales excluding gasoline increased by 8.2%, benefiting
by approximately 0.4 percentage points from the net impact of
weather and calendar shifts. Food Lion continued to lead brand
performance, celebrating 40 consecutive quarters of positive sales
growth.
In Q3, online sales in the segment were up 20.8% in constant
currency. This builds on top of 52.9% constant currency growth in
the same quarter last year.
Underlying operating margin in the U.S. was 5.0%, up 0.2
percentage points at constant exchange rates from the prior year
period. Q3 U.S. underlying operating margins benefited by 0.3
percentage points from a favorable reserve release impacted by
various safety programs. In Q3, U.S. IFRS-reported operating margin
was 3.9%, mainly impacted by an impairment charge in the amount of
€187 million for FreshDirect.
Europe highlights
European net sales were €7.7 billion, an increase of 9.6%
at constant exchange rates and 10.0% at actual exchange rates.
These sales also benefited slightly from the 2021 acquisition of 38
stores from DEEN in the Netherlands, which was lapped late in Q3.
Europe's comparable sales excluding gasoline increased by 7.4%, as
shelf inflation accelerated in the quarter, and year-over-year
comparisons eased versus a difficult first half of the year. Q3
Europe comparable sales were negatively impacted by approximately
0.1 percentage points from calendar shifts.
In Q3, net consumer online sales in the segment increased by
6.1%, following 20.1% growth in the same period last year. Net
consumer online growth was driven in large part by strong grocery
sales, where Ahold Delhaize's robust online solutions continue to
serve consumers well. While non-food e-commerce market conditions
in the Benelux remained soft, bol.com continued to gain market
share, enabling it to generate positive net consumer online sales
growth of 5.6% in the quarter, a sequential improvement versus the
prior quarter. Bol.com's net consumer online sales from its more
than 50,000 third-party sellers grew at 11% in Q3 and represented
59% of sales.
Underlying operating margin in Europe was 3.4%, down 0.9
percentage points from the prior year due to volume deleveraging
and escalating energy and other cost pressures. Europe's Q3
IFRS-reported operating margin was 4.1%, positively impacted by the
release of a wage tax provision in the amount of €62
million.
Outlook 2022
Despite challenging macro-economic operating conditions, our Q3
results provide us with the ability to again increase our full year
EPS outlook. We now forecast low-double-digit 2022 diluted
underlying EPS growth, versus the prior guidance of growth at a
mid-single-digit range.
Ahold Delhaize's 2022 Group underlying operating margin is
expected to be at least 4.0%, in line with the Company's historical
profile. Management believes that the Company's brands continue to
offer consumers a strong shopping proposition and are
well-positioned to maintain profitability in the current
inflationary environment. Ahold Delhaize's Save for Our Customers
initiative is on track to deliver more than €850 million in
savings in 2022, which is helping to offset cost pressures related
to inflation and supply chain issues, along with the negative
impact to margins from increased online sales
penetration.
The 2022 free cash flow outlook remains at approximately €2.0
billion, with net capital expenditures expected to total
approximately €2.5 billion. As labor and raw material costs remain
high, we reiterate our commitment to exercise discipline in
executing and phasing the timing of investments, in order to ensure
hurdle rates and return on capital metrics are achieved.
In addition, Ahold Delhaize remains committed to its dividend
policy and share buyback program, as previously stated. We are on
track to increase our full-year dividend within our 40-50% payout
range, in line with our policy, and we are executing our €1 billion
share repurchase program in 2022 as planned. Ahold Delhaize also
announces a new €1 billion share buyback program to start at the
beginning of 20233.
|
Full-year outlook |
|
Underlying operating margin |
Underlying EPS |
Save for Our Customers |
|
Net capital expenditures |
Free cash flow1 |
|
Dividend payout ratio2.3 |
Share buyback3 |
Outlook |
2022 |
|
At least 4% |
Low-double-digit growth vs. 2021 |
> €850 million |
|
~ €2.5 billion |
~ €2.0 billion |
|
40-50% payout;YOY growth in dividend per
share |
€1 billion |
- Excludes M&A.
- Calculated as a percentage of underlying income from continuing
operations.
- Management remains committed to the share buyback and dividend
program, but, given the uncertainty caused by the wider
macro-economic consequences of the war in Ukraine and COVID-19,
will continue to monitor macro-economic developments. The program
is also subject to changes resulting from corporate activities,
such as material M&A activity.
- Ahold Delhaize Q3 2022 Press release
- Ahold Delhaize Q3 2022 Interim report
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