Ahold Delhaize sees pricing pressure in U.S. Food Lion markets
ZAANDAM, The Netherlands — Ahold Delhaize on Thursday released its first full set of quarterly results since the July completion of the merger of Ahold and Delhaize. The full company saw Q3 net sales of €13.86 billion ($14.75 billion) on an IFRS basis and €14.54 billion ($15.49 billion) on a pro forma basis. The pro forma numbers are used to give effect to the merger as if it had taken place on the first day of the company’s 2015 fiscal year.
“Despite challenging conditions in certain markets, Ahold Delhaize has delivered growth in sales and in underlying operating income on a pro forma basis which reflects the strength and resilience of our great local brands, as well as our continued focus on delivering cost efficiencies across our businesses while driving top-line growth," Ahold Delhaize CEO Dick Boer said.
Those challenges were seen slightly by Ahold USA, which posted a 1.4% increase in Q3 over last year, with sales hitting €5.3 billion ($5.6 billion) or a 2% increase to $5.2 billion on a pro forma basis. Pro forma comparable-store sales declined 0.5%, but excluding gasoline rose 0.3% over the same quarter last year. At the same time, Ahold USA grew its year-over-year market share as the result of its acquisition of several A&_ stores in the New York metro area at the end of Q3 2015. It also successfully rolled out new produce and bakery sections.
“The program to improve the customer proposition at Ahold USA, together with the strengthening of the Stop & Shop store network in the New York Metro area resulted in volume growth,” Boer said.”
Delhaize America saw net sales rise 0.6% on a pro forma basis to €3.8 billion ($4.02 billion) and saw comps rise 1.3%. The company said the sales growth in Q3 was impacted by increased retail price deflation, driven largely by competitive pricing in markets where the company operates its Food Lion banners. In October, Food Lion relaunched 142 of its stores as part of its “Easy, Fresh & Affordable” initiative in the Charlotte, N.C, market.
“The trading environment in the U.S. remained challenging with ongoing price deflation and competitive pressures in the market,” Boer said. “At Delhaize America, both Food Lion and Hannaford continued to experience positive comparable sales and volume growth. Third-quarter sales growth was impacted by increased retail price deflation, mainly at Food Lion as a result of a more intense competitive environment.”
Looking forward, Ahold Delhaize said it expected the deflation in U.S. food sales to continue at their current rate and projects an overall full-year pro forma underlying operating profit margin in-line with its year-to-date performance, which was 3.5% in Q3.