Ahold Delhaize reports Q1 results significantly impacted by
COVID-19
- Net sales were €18.2 billion, up 14.7%, or 12.7% at constant
exchange rates
- In the U.S. and Europe, comp sales growth excluding gas was up
13.8% and 9.8%, respectively
- Net consumer online sales grew 37.7% at constant exchange
rates
- Operating income was €964 million, up 40.0% at constant
exchange rates
- Underlying operating margin was 5.3%, up 0.9% points from the
prior year
- Diluted underlying EPS was €0.59, up 49.5%; diluted EPS was
€0.59
Zaandam, the Netherlands, May 7, 2020 – Ahold Delhaize, one of
the world’s largest food retail groups and a leader in both
supermarkets and eCommerce, reports first quarter results
today.
The Interim report for the first quarter 2020 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 |
|
Q1 2020 |
% change constant rates |
Q1 2020 |
% change constant rates |
Q1 2020 |
% change constant rates |
|
|
|
|
|
|
|
|
Net sales |
|
18,208 |
|
12.7 |
% |
11,315 |
|
13.7 |
% |
6,893 |
|
11.0 |
% |
Comparable sales growth excl.
gas |
|
12.2 |
% |
|
13.8 |
% |
|
9.8 |
% |
|
Online sales |
|
998 |
|
30.0 |
% |
324 |
|
42.3 |
% |
674 |
|
24.8 |
% |
Net consumer online
sales |
|
1,345 |
|
37.7 |
% |
324 |
|
42.3 |
% |
1,021 |
|
36.3 |
% |
Operating
margin |
|
5.3 |
% |
1.0 |
pts |
6.6 |
% |
1.8 |
pts |
4.3 |
% |
0.3 |
pts |
Underlying operating
margin |
|
5.3 |
% |
0.9 |
pts |
6.7 |
% |
1.7 |
pts |
4.1 |
% |
0.1 |
pts |
Diluted
EPS |
|
0.59 |
|
51.8 |
% |
|
|
|
|
Diluted underlying
EPS |
|
0.59 |
|
46.5 |
% |
|
|
|
|
Free Cash Flow |
|
1,228 |
|
NM |
|
|
|
|
Comments from Frans Muller, President and CEO of Ahold
Delhaize "I greatly admire the dedication shown by
the associates across our brands, who have stepped up to serve
their local communities in the face of the immense challenges
arising from the COVID-19 crisis. We remain relentlessly committed
to protecting the health and safety of associates and customers,
and living up to our values, two of which are 'care' and
'teamwork.'
"Clearly, our Q1 sales performance across all geographies was
impacted by the unprecedented demand and pressures created by the
COVID-19 outbreak. We have responded by implementing additional
safety and protective measures, enhancing associate pay and
benefits, and making charitable donations to support local
communities. The costs related to our efforts will more
significantly impact subsequent quarters. Nevertheless, we maintain
our full-year outlook that our group underlying operating margin
will be broadly in line with 2019.
"Protecting the health and safety of our associates and
customers remains our first and foremost priority, along with
operating our brands and supply chains smoothly. We will keep
monitoring and learning from changes in consumer shopping patterns
and behavior. While it is still too early to know which paradigm
shifts will emerge from the COVID-19 crisis, we continue to
prioritize investments in accelerating our digital and omnichannel
capabilities, as well as improving our store fleet, in order to
grow our share of wallet.
"Separately, I'd like to welcome Natalie Knight, who was
appointed as our CFO on April 8. With her demonstrated leadership
in financial discipline and business transformation efforts, she is
ideally qualified to help us accelerate our Leading Together
strategy."
Q1 Financial highlights
Group net sales were €18.2 billion, up 14.7%, or 12.7% at
constant exchange rates, driven largely by 12.2% comparable sales
growth excluding gasoline. Group comparable sales were favorably
impacted by 26.9% growth in March due primarily to COVID-19, and
unfavorably impacted by -0.3% points due to the net effect of a
weather and calendar shift in the quarter. Group net consumer
online sales grew 37.7% in Q1 at constant exchange rates. Group
underlying operating margin in Q1 was 5.3%, up 0.9% points from the
prior year, benefiting largely from the timing of unexpectedly
higher sales that preceded the timing of significant investments
related to COVID-19. This was a phenomenon that was more pronounced
in the U.S. than in Europe, as Europe experienced earlier customer
stockpiling in late February, and therefore saw earlier investments
related to COVID-19, while the U.S. experienced later stockpiling
in March.
U.S. comparable store sales excluding gasoline grew 13.8%, with
all brands generating double-digit comparable sales growth due
largely to the COVID-19 outbreak. Comparable sales were favorably
impacted by 33.8% growth in March due primarily to COVID-19, and
unfavorably impacted by less severe winter weather, which amounted
to -0.8% points in the quarter. Online sales in the segment were up
42.3% in constant currency. U.S. underlying operating margin was
6.7%, up 1.7% points from the prior year, driven largely by the
aforementioned timing benefit from higher sales preceding material
COVID-19-related investments.
Europe's comparable sales excluding gasoline grew 9.8%, to a
significant degree due to the COVID-19 crisis. Comparable sales
were favorably impacted by 15.9% growth in March due primarily to
COVID-19, and were also impacted by a calendar shift benefit of
+0.4% points in the quarter. Net consumer online sales in the
segment were up 36.3%. All countries in Europe experienced higher
than normal demand, though in the central and southeastern European
countries, demand grew slightly faster than the overall segment.
Underlying operating margin in Europe was 4.1%, up 0.1% points from
the prior year. The aforementioned timing benefit from higher sales
preceding material COVID-19 investments was less pronounced in
Europe, and the benefit was offset partly by higher pension expense
in the Netherlands, amounting to €11 million, as well as additional
planned investments in digital and omnichannel
capabilities.
At bol.com, the online retail platform in the Benelux included
within the Europe segment results, net consumer sales grew by
39.5%. Bol.com's third party sales grew 66% in the quarter with
nearly 21,000 merchant partners on the platform.
Net income was €645 million, up 48.2%. Diluted EPS was €0.59, up
54.9%, and diluted underlying EPS was €0.59, up 49.5%.
Outlook
We maintain our full-year outlook, as updated on April 7. While
COVID-19 has created uncertainty for the 2020 outlook, COVID-19
related investments became material at the end of Q1 and will
become significantly more visible in subsequent quarters. We expect
2020 free cash flow to be above €1.5 billion. The upside is mainly
related to strong levels of free cash flow generated in Q1, rather
than delays in capital spending, as we had previously indicated.
While some capital projects will inevitably be delayed, we are
accelerating investments in digital and omnichannel capabilities.
We remain committed to our dividend policy and share buyback
program, but given the uncertainty caused by COVID-19, we will
continue to monitor macroeconomic developments.
Full-year outlook |
Underlying operating margin1 |
Underlying EPS |
Save for Our Customers |
|
Capital expenditures |
Free cash flow2 |
|
Dividend payout ratio3 |
Share buyback |
2020 |
Broadly in line with 2019 |
Mid-single-digit growth |
€600 million |
|
~ €2.5 billion |
> €1.5 billion |
|
40-50% |
€1 billion |
- 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, there will
be margin dilution related to €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.
- Excludes M&A
- Calculated as a percentage of underlying income from continuing
operations
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 2020,
remain, committed, subsequent quarters, maintain, full-year,
outlook, will be, remains, monitoring, changes, will, emerge,
continue to, to grow, strategy, become, expect, to be, be
delayed, monitor, developments, growth, should, continuing
operations, long-term, plan, change, to mitigate, focus on,
continuity 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; natural
disasters and geopolitical events; 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 Q1 2020 Press release
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