Ahold Delhaize reports hike in Q2 sales, raises full-year EPS

Despite facing high levels of inflation, Ahold Delhaize said its 850 million euros “Save For Our Customers” cost savings program enabled it to absorb cost increases for customers, introduce more entry-priced products, expand high-quality own-brand assortments and deliver personalized value through loyalty programs, as it reported its second quarter results.

“I am pleased to report we had a strong second quarter,” said Frans Muller, president and CEO. “Our overall results confirm the strength and breadth of our brand portfolio. Our brands’ unparalleled understanding of customers, broad assortments and product offerings, as well as the stickiness of food-at-home consumption, are giving us the opportunity to play to our strengths and support customers in a challenging environment.”

Ahold Delhaize’s group net sales were 21.4 billion euros, an increase of 6.4% at constant exchange rates, and up 15% at actual exchange rates. Group net sales were driven by positive contributions from comparable sales growth, excluding gasoline of 4.7%, foreign currency translation benefits and, to a lesser extent, by the DEEN acquisition and higher gasoline sales. Q2 group comparable sales benefited by approximately 0.8 percentage points from calendar shifts relating to the timing of Easter.

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In Q2, group net consumer online sales increased by 4.8% at constant exchange rates, led by a robust performance in the United States, which was partly offset by the cycling of a strong Q2 2021 in Europe at bol.com. Excluding bol.com, net consumer online sales increased 11.5% at constant exchange rates.

In Q2, group underlying operating margin was 4.1%, down 0.4 percentage points compared with Q2 2021 at constant exchange rates, mainly reflecting higher labor, distribution and energy costs, and an unfavorable mix effect compared with the prior year period. In Q2, group IFRS-reported operating income was 895 million euros, representing an IFRS-reported operating margin of 4.2%.

Underlying income from continuing operations was 593 million euros, up 7.6% in the quarter at actual rates. Ahold Delhaize’s IFRS-reported net income in the quarter was 603 million euros. Diluted EPS was 0.60 euros and diluted underlying EPS was 0.59 euros, up 11.0% at actual currency rates compared with last year’s results.

In the quarter, 9.5 million own shares were purchased for 255 million euros, bringing the total amount to 523 million euros in the first half of the year. The 2022 interim dividend is 0.46 euros, up 7% versus the prior year, and, in line with the group’s dividend policy, represents 40% of the first half of 2022 underlying income per share from continuing operations.

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In the U.S., net sales were 13.6 billion euros, an increase of 7.7% at constant exchange rates and up 22.1% at actual exchange rates. U.S. comparable sales excluding gasoline increased 6.4%, benefiting by approximately 0.9 percentage points from calendar shifts. Food Lion continued to lead brand performance with 39 consecutive quarters of positive sales growth.

In Q2, online sales in the segment were up 16.4% in constant currency. This builds on top of the strong 61% constant currency growth in the same quarter last year.

Underlying operating margin in the U.S. was 4.7%, down 0.3 percentage points at constant exchange rates from the prior year period. In Q2, U.S. IFRS-reported operating margin was also 4.7%.

European net sales were 7.9 billion euros, an increase of 4.2% at constant exchange rates and 4.5% at actual exchange rates. These sales also benefited from the 2021 acquisition of 38 stores from DEEN in the Netherlands. Europe’s comparable sales excluding gasoline increased 1.8% due in part to a positive impact of approximately 0.7 percentage points from calendar shifts.

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In Q2, net consumer online sales in the segment were down 1.1%, following 27% growth in the same period last year. The decline was due to weak non-food e-commerce market conditions in the Benelux, which contracted at a high single digit rate as brick-and-mortar non-food retail sales recovered from prior year lockdown measures. Bol.com’s percentage of net consumer online sales from its nearly 50,000 third-party sellers was 61% in Q2.

Underlying operating margin in Europe was 3.4%, down 0.8 percentage points from the prior year due to volume deleveraging, particularly in the Benelux from lapsed benefits of lockdown restrictions, as well as significant price competition in Belgium and Greece. Europe’s Q2 IFRS-reported operating margin was 3.5%.

Based on the strong half-year earnings, as well as other macro-economic, foreign exchange and interest rate factors, the company said that it is raising underlying EPS guidance for 2022. It said it now expects underlying EPS to grow at a mid-single-digit rate relative to 2021 versus its original outlook of a low- to mid-single-digit decline relative to 2021 and its updated outlook, announced in May, of growth remaining comparable with 2021 levels.

The 2022 free cash flow outlook also has been raised to be approximately 2 billion euros, compared with the previous outlook of approximately 1.7 billion euros. Net capital expenditures are expected to total approximately 2.5 billion euros. As labor and raw material costs remain high, the company said it reiterates its 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.