Ahold Delhaize reports strong Q3 results; announces initiatives to
solidify position as industry- leading local omnichannel retailer
in 2021 and beyond
- Net sales were €17.8 billion, up 6.8%, or 10.1% at constant
exchange rates
- In the U.S. and Europe, comp sales growth excluding gas was up
12.4% and 7.5%, respectively
- Net consumer online sales grew 62.6% at constant exchange
rates; including 114.7% growth in the U.S.
- COVID-19-related costs were approximately €470 million
year to date, and approximately €140 million in Q3, including
safety measures and enhanced associate pay
- Underlying operating margin was 4.6%, up 0.2% points from the
prior year at constant exchange rates
- IFRS reported operating income was €207 million, impacted
by the previously announced €577 million provision for a U.S.
pension plan withdrawal
- Diluted underlying EPS was €0.50, increasing 12.3%; diluted EPS
was €0.06, unfavorably impacted by the provision for a U.S. pension
plan withdrawal
- 2020 underlying EPS outlook raised to growth in the high-20%
range; continue to expect free cash flow to be at least €1.7
billion, net of Q4 payment for a U.S. pension plan withdrawal, and
capital expenditures of around €2.5 billion
- Announcing a new €1 billion share buyback program to start at
the beginning of 2021
Zaandam, the Netherlands, November 4, 2020 – 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 can be viewed and
downloaded at www.aholddelhaize.com
Summary of key financial data
|
Ahold Delhaize Group |
The United States |
Europe |
Ahold Delhaize Group |
The United States |
Europe |
€ million, except per share data |
Q3 2020 |
% change constant rates |
Q3 2020 |
% change constant rates |
Q3 2020 |
% change constant rates |
Q3 YTD 2020 |
% change constant rates |
Q3 YTD 2020 |
% change constant rates |
Q3 YTD 2020 |
% change constant rates |
Net sales |
17,826 |
|
10.1 |
% |
10,875 |
|
11.3 |
% |
6,951 |
|
8.3 |
% |
55,136 |
|
12.9 |
% |
34,045 |
|
14.5 |
% |
21,091 |
|
10.3 |
% |
Comparable sales growth excl.
gas |
10.5 |
% |
|
12.4 |
% |
|
7.5 |
% |
|
13.1 |
% |
|
15.5 |
% |
|
9.2 |
% |
|
Online sales |
1,334 |
|
59.1 |
% |
499 |
|
114.7 |
% |
834 |
|
37.8 |
% |
3,679 |
|
53.0 |
% |
1,336 |
|
95.0 |
% |
2,343 |
|
36.3 |
% |
Net consumer online sales |
1,780 |
|
62.6 |
% |
499 |
|
114.7 |
% |
1,281 |
|
48.6 |
% |
4,971 |
|
59.8 |
% |
1,336 |
|
95.0 |
% |
3,636 |
|
49.9 |
% |
Operating income (loss) |
207 |
|
(68.5) |
% |
(36) |
|
NM |
277 |
|
(0.6) |
% |
2,174 |
|
13.8 |
% |
1,422 |
|
14.6 |
% |
900 |
|
11.2 |
% |
Operating margin |
1.2 |
% |
(2.9) |
pts |
(0.3) |
% |
NM |
4.0 |
% |
(0.4) |
pts |
3.9 |
% |
— |
pts |
4.2 |
% |
0.1 |
pts |
4.3 |
% |
— |
pts |
Underlying operating income |
813 |
|
15.9 |
% |
547 |
|
27.7 |
% |
300 |
|
(3.2) |
% |
2,783 |
|
38.6 |
% |
2,024 |
|
58.4 |
% |
907 |
|
6.9 |
% |
Underlying operating margin |
4.6 |
% |
0.2 |
pts |
5.0 |
% |
0.6 |
pts |
4.3 |
% |
(0.5) |
pts |
5.0 |
% |
0.9 |
pts |
5.9 |
% |
1.6 |
pts |
4.3 |
% |
(0.1) |
pts |
Diluted EPS |
0.06 |
|
(83.9) |
% |
|
|
|
|
1.31 |
|
19.6 |
% |
|
|
|
|
Diluted underlying
EPS |
0.50 |
|
15.9 |
% |
|
|
|
|
1.73 |
|
46.9 |
% |
|
|
|
|
Free cash flow |
176 |
|
(62.7) |
% |
|
|
|
|
1,937 |
|
134.7 |
% |
|
|
|
|
Comments from Frans Muller, President and CEO of Ahold
Delhaize
"As COVID-19 continues to impact our communities, I am
increasingly proud of our teams' performance. Their intense focus
on the safety of our stores and distribution centers and their
persistent efforts to provide outstanding service to our local
communities are commendable. In Q3, we sustained important
investments in additional safety measures, enhanced associate pay
and benefits, and significant charitable donations, which resulted
in approximately €140 million in COVID-19-related costs in the
quarter, and €470 million year to date.
"The operational execution by our teams remains outstanding and
has continued to drive strong Q3 performance in both the U.S. and
Europe. Our results reflected our ability to leverage our leading
local digital and omnichannel platform, which generated nearly 115%
net consumer online sales growth in the U.S. and nearly 50% growth
in Europe in the quarter, at constant exchanges rates. While there
remains a high level of uncertainty in the market, our strong
year-to-date performance allows us to raise our 2020 underlying EPS
outlook once again.
"We continue to adapt to changes we are seeing in consumer
shopping patterns and behavior. Over the coming years, we will
invest in our business to solidify our position as an
industry-leading local omnichannel retailer and increase our share
of the consumer wallet. We will find ways to improve our online
productivity and are on track to achieve the €1.9 billion
cumulative cost savings target by 2021. To benefit all of our
stakeholders, we aim to strike the appropriate balance between
investing in the health and safety of associates and customers,
supporting our local communities, prioritizing environmental,
social, and governance (ESG) initiatives, and returning capital to
shareholders.
"We therefore remain committed to our policy for a 40-50%
dividend payout ratio and are today announcing a new €1 billion
share repurchase authorization for 2021, which is a testament to
the strength we continue to see in our business model."
Solidifying position as industry-leading local
omnichannel retailer in 2021+
Ahold Delhaize will continue to solidify its position as
industry-leading local omnichannel retailer in 2021 and beyond,
concentrating on the following three areas:
Significantly step-up online capacity, supply chain, and
technological capabilities |
- Today, our U.S. businesses reach approximately 90% of
households in our markets with home delivery and Click &
Collect, and around 70% with same-day options.
|
- In 2020 and 2021 cumulatively, we will increase our online
capacity by nearly 100% in the U.S. and nearly 50% in Europe. This
will be inclusive of an over 50% increase in capacity at bol.com in
2020 and 2021, and an expansion to nearly 1,400 Click & Collect
locations in the U.S. by 2021, doubling the locations since the
beginning of 2020.
|
- To better serve customers, we are improving our U.S. supply
chain capabilities by moving to a fully integrated,
self-distribution model beginning in 2023; we are progressing on
our deliverables ahead of schedule and the first integrated
distribution center of the transformation initiative will go live
in 2021.
|
- Our European businesses will increase electronic shelf labeling
options to improve convenience and productivity; this technology
will be implemented at more than 50% of our European grocery stores
in 2021, doubling the number from 2020; Nearly all Albert Heijn-
and Delhaize-owned stores will have electronic shelf labeling by
year-end 2020.
|
Advance omnichannel offerings to consumers |
- The U.S. businesses are focused on enhancing subscription
offerings. The GIANT Company will test a new subscription offer in
Q1 2021, with an annual membership fee under $100, improved value
proposition and preferential delivery time slots, driving increased
loyalty and engagement.
|
- The U.S. businesses will offer an "endless aisle" solution with
an additional 80,000-100,000 general merchandise and food items in
the first half of 2021, utilizing the Mirakl platform.
|
- The U.S. businesses will continue to enhance the value
proposition to customers, including launching 1,500-2,000 more
own-brand items in 2021, growing from the existing base of 15,000
items.
|
- The Stop & Shop remodeling program in the U.S. will be
accelerated, with approximately 60 additional stores in 2021 vs. 31
in 2020. The remodeled stores are performing well, with sales lifts
in line with our expectations.
|
- In July, Albert Heijn launched a home delivery service in the
Antwerp region of Belgium, which is off to a promising start.
|
- In August, bol.com expanded to French-speaking Belgium in
Brussels and Wallonia; beyond improving access for French-speaking
Belgians, the brand has already managed to attract thousands of
Belgian third-party sellers.
|
- In September, Albert Heijn announced the launch of a no-fee
home delivery service in its first market in the Netherlands,
targeting smaller households; will expand to additional markets in
2021.
|
- Mega Image in Romania launched a 90-minute home delivery
offering in Bucharest in September.
|
- Albert Heijn has remodeled over 200 stores to its new fresh and
technology-focused format and plans to remodel 170 more in 2020 and
2021. The stores are performing well and providing an uplift in
sales and customers relative to the control group.
|
Address the call to action in ESG |
- Our brands are enhancing their strong value proposition through
our leading own-brand offerings; the goal is to have 51% of these
sales be from healthy products by 2022.
|
- Our brands are focusing on increasing discounts and rewards on
healthier products, using nutritional guidance systems like
Nutriscore and Guiding Stars, and will implement easy-to-use
nutritional labeling across our portfolio by the end of 2025.
|
- In October, the U.S. announced its target for at least 54% of
own-brand food sales to be from products that achieve one, two or
three stars through the Guiding Stars nutrition guidance program by
2025; starting in 2020, they will also disclose annually the
percentage of food sales generated from all products that achieve
one, two, or three stars.
|
- As a member of the 10x20x30 initiative, our brands are
partnering with suppliers toward halving food waste by 2030.
|
- We are focused on working toward zero plastic waste from
own-brand packaging by 2025, including aiming for 25% of own-brand
plastic packaging made from recycled materials.
|
- We are committed to science-based targets for 2030 to halve
carbon emissions from our operations and reduce value chain
emissions by 15%.
|
- We embrace clear standards on human rights, such as
non-discrimination and the prevention of forced and child labor.
Following the publication of our inaugural Human Rights Report in
June 2020, we are now strengthening governance and working with the
our brands to develop local roadmaps that take into consideration
the six salient issues and gaps identified in the report.
|
- Our brands aim to provide competitive associate pay based on
industry practices and local market conditions. Several brands
implemented temporary pay enhancements due to special challenges
related to the COVID-19 pandemic.
|
- We strive for 100% gender balanced candidate and succession
slates for all leadership positions. Further, we aspire for 100% of
associates to rate the company as inclusive.
|
Q3 Financial highlights
Group net sales were €17.8 billion, up 6.8%, or 10.1% at
constant exchange rates, driven largely by 10.5% comparable sales
growth excluding gasoline. Group comparable sales were mainly
driven by demand related to COVID-19. Group net consumer online
sales grew 62.6% in Q3 at constant exchange rates. Group underlying
operating margin in Q3 was 4.6%, up 0.2 percentage points from the
prior year at constant exchange rates, benefiting largely from
higher operating leverage due to higher sales trends related to
COVID-19. This was offset in part by significant costs related to
COVID-19, which amounted to approximately €140 million in
Q3.
U.S. comparable store sales excluding gasoline grew 12.4%, due
largely to the COVID-19 outbreak. Brand performance was strong
across the board, led by growth at Food Lion and Giant Food. Online
sales in the segment were up 114.7% in constant currency. U.S.
underlying operating margin was 5.0%, up 0.6 percentage points from
the prior year at constant exchange rates, driven largely by
operating leverage from higher sales growth due to COVID-19, offset
in part by significant costs related to COVID-19.
Europe's comparable sales excluding gasoline grew 7.5%, due
largely to demand related to COVID-19. Net consumer online sales in
the segment were up 48.6%. Underlying operating margin in Europe
was 4.3%, down 0.5 percentage points from the prior year at
constant exchange rates. Operating leverage from higher sales
growth was largely offset by higher costs related to COVID-19 as
well as €11 million of pension expense in the Netherlands during
the quarter and the lapping of one-time items that benefited
margins in the Netherlands in the prior year's quarter. Excluding
these impacts, underlying operating margin in Europe would have
been unchanged versus the prior year.
At bol.com, the online retail platform in the Benelux included
within the Europe segment's results, net consumer sales grew by
45.6%. Bol.com's sales from third-party sellers grew 73% in the
quarter, with nearly 37,000 merchant partners on the platform.
Ahold Delhaize's net income was €68 million, down 84.9% in the
quarter due primarily to a previously announced €577 million
provision for a U.S. pension plan withdrawal. Underlying income
from continuing operations was €530 million, up 8.6% in the
quarter. Diluted EPS was €0.06, down 84.4%, and diluted underlying
EPS was €0.50, up 12.3%. Nearly 7.5 million shares were purchased
in the quarter for €186 million, bringing the total amount to
€705 million in the first three quarters of the year.
Outlook
COVID-19 continues to create significant uncertainty for the
remainder of 2020, though, due to the Company's strong performance
so far this year, guidance for underlying EPS is being raised to
the high-20% range from low-to-mid-20% growth previously. The group
will reach its €7 billion net consumer online sales goal in 2020,
one year ahead of plan.
Underlying operating margin in 2020 is still expected to be
higher than 2019.
The 2020 free cash flow outlook of at least €1.7 billion is
reiterated and includes the effect of paying the majority of the
previously announced €577 million pre-tax obligation to withdraw
from the UFCW International Union – Industry Pension Fund in Q4.
The capital expenditure guidance of around €2.5 billion is
maintained and reflects the Company's accelerated investments in
digital and omnichannel capabilities. In addition, Ahold Delhaize
remains committed to its dividend policy and share buyback program
in 2020, as previously stated. A new €1 billion share buyback
program has been authorized, to start at the beginning of 2021.
|
Full-year outlook |
|
Underlying operating margin1 |
Underlying EPS |
Save for Our Customers |
|
Capital expenditures |
Free cash flow2 |
|
Dividend payout ratio3 |
Share
buyback4 |
Updated Outlook |
2020 |
|
Higher than 2019 |
High-20% growth |
€600 million |
|
~ €2.5 billion |
> €1.7 billion |
|
40-50% |
€1 billion |
|
|
|
|
|
|
|
|
|
|
|
|
Previous Outlook |
2020 |
|
Higher than 2019 |
Low-to-mid-20% growth |
€600 million |
|
~ €2.5 billion |
> €1.7 billion |
|
40-50% |
€1 billion |
1. No significant impact to
underlying operating margin from the 53rd week, though the 53rd
week should benefit net sales for the full year by 1.5-2.0%.
Comparable sales growth will be presented on a comparable 53-week
basis. As previously communicated, the margin includes a dilution
of €45 million in transition expenses from the U.S. supply chain
initiative, and an increased non-cash service charge of €45 million
for the Netherlands employee pension plan, resulting from lower
discount rates in the Netherlands.2. Excludes M&A3. Calculated
as a percentage of underlying income from continuing operations4.
Management remains committed to the share buyback program, but
given the uncertainty caused by COVID-19, they will continue to
monitor macroeconomic developments. The program is also subject to
changes in corporate activities, such as material M&A
activity.
Cautionary notice
This press release contains information that qualifies as inside
information within the meaning of Article 7(1) of the EU Market
Abuse Regulation.
This communication includes forward-looking statements. All
statements other than statements of historical facts may be
forward-looking statements. Words and expressions such as 2021 (and
beyond), constant, growth, outlook, expect(s), continue(s), to
start, sustained, continue(d), remains(s), changes, will, on track,
by, aim, committed, 2023, year-end 2020, progressing, focused on,
aiming for, improving, test, offer, launching, expectations,
beyond, focus, now strengthening, promising start, plan(s) (to),
goal, 2022, focusing on, 2025, 2030, now strengthening, strive for,
aspire, maintained, 53rd week, 53-week basis, should, or other
similar words or expressions are typically used to identify
forward-looking statements.
Forward-looking statements are subject to risks, uncertainties
and other factors that are difficult to predict and that may cause
the actual results of Koninklijke Ahold Delhaize N.V. (the
“Company”) to differ materially from future results expressed or
implied by such forward-looking statements. Such factors include,
but are not limited to, risks relating to the Company’s inability
to successfully implement its strategy, manage the growth of its
business or realize the anticipated benefits of acquisitions; risks
relating to competition and pressure on profit margins in the food
retail industry; the impact of economic conditions on consumer
spending; turbulence in the global capital markets; political
developments, natural disasters and pandemics; climate change; raw
material scarcity and human rights developments in the supply
chain; disruption of operations and other factors negatively
affecting the Company’s suppliers; the unsuccessful operation of
the Company’s franchised and affiliated stores; changes in supplier
terms and the inability to pass on cost increases to prices; risks
related to corporate responsibility and sustainable retailing; food
safety issues resulting in product liability claims and adverse
publicity; environmental liabilities associated with the properties
that the Company owns or leases; competitive labor markets, changes
in labor conditions and labor disruptions; increases in costs
associated with the Company’s defined benefit pension plans; the
failure or breach of security of IT systems; the Company’s
inability to successfully complete divestitures and the effect of
contingent liabilities arising from completed divestitures;
antitrust and similar legislation; unexpected outcomes in the
Company’s legal proceedings; additional expenses or capital
expenditures associated with compliance with federal, regional,
state and local laws and regulations; unexpected outcomes with
respect to tax audits; the impact of the Company’s outstanding
financial debt; the Company’s ability to generate positive cash
flows; fluctuation in interest rates; the change in reference
interest rate; the impact of downgrades of the Company’s credit
ratings and the associated increase in the Company’s cost of
borrowing; exchange rate fluctuations; inherent limitations in the
Company’s control systems; changes in accounting standards; adverse
results arising from the Company’s claims against its
self-insurance program; the Company’s inability to locate
appropriate real estate or enter into real estate leases on
commercially acceptable terms; and other factors discussed in the
Company’s public filings and other disclosures.
Forward-looking statements reflect the current views of the
Company’s management and assumptions based on information currently
available to the Company’s management. Forward-looking statements
speak only as of the date they are made, and the Company does not
assume any obligation to update such statements, except as required
by law.
- Ahold Delhaize Q3 2020 Press release
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