Ahold Delhaize reports strong Q2 results that continue to be
impacted by COVID-19
- Net sales were €19.1 billion, up 17.1%, or 15.9% at constant
exchange rates
- In the U.S. and Europe, comp sales growth excluding gas was up
20.6% and 10.2%, respectively
- Net consumer online sales grew 77.6% at constant exchange
rates; Ahold Delhaize will reach €7 billion net consumer online
sales goal in 2020, one year ahead of plan
- COVID-19-related costs were approximately €330 million in the
first half of the year, and approximately €260 million in Q2,
including safety measures and enhanced associate
pay
- Operating income was €1,004 million, increasing 78.0% at
constant exchange rates
- Underlying operating margin was 5.3%, up 1.7% points from the
prior year at constant exchange rates
- Diluted EPS was €0.65; diluted underlying EPS was €0.65,
increasing 87.9%
- 2020 outlook raised, with underlying EPS growth in the
low-to-mid-20% range; free cash flow expected to be at least €1.7
billion, net of paying the majority of a tentative U.S. pension
plan withdrawal agreement
- 2020 interim dividend is €0.50, up 67% and based on 40% of
first half 2020 underlying income per share1
1 from continuing operations
Zaandam, the Netherlands, August 5, 2020 – Ahold Delhaize, one
of the world’s largest food retail groups and a leader in both
supermarkets and eCommerce, reports second quarter and half year
results today.
The interim report for the second quarter and half year 2020 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 |
Q2 2020 |
% change constant rates |
Q2 2020 |
% change constant rates |
Q2 2020 |
% change constant rates |
YTD 2020 |
% change constant rates |
YTD 2020 |
% change constant rates |
YTD 2020 |
% change constant rates |
Net
sales |
19,103 |
|
15.9 |
% |
11,856 |
|
18.7 |
% |
7,247 |
|
11.4 |
% |
37,310 |
|
14.3 |
% |
23,170 |
|
16.2 |
% |
14,140 |
|
11.2 |
% |
Comparable sales growth excl.
gas |
16.4 |
% |
|
20.6 |
% |
|
10.2 |
% |
|
14.4 |
% |
|
17.2 |
% |
|
10.0 |
% |
|
Online sales |
1,347 |
|
68.7 |
% |
512 |
|
126.8 |
% |
834 |
|
45.8 |
% |
2,345 |
|
49.7 |
% |
836 |
|
84.3 |
% |
1,509 |
|
35.6 |
% |
Net consumer online
sales |
1,846 |
|
77.6 |
% |
512 |
|
126.8 |
% |
1,334 |
|
63.9 |
% |
3,191 |
|
58.3 |
% |
836 |
|
84.3 |
% |
2,355 |
|
50.7 |
% |
Operating
income |
1,004 |
|
78.0 |
% |
716 |
|
112.7 |
% |
325 |
|
15.6 |
% |
1,967 |
|
57.1 |
% |
1,458 |
|
79.8 |
% |
623 |
|
17.5 |
% |
Operating margin |
5.3 |
% |
1.8 |
pts |
6.0 |
% |
2.7 |
pts |
4.5 |
% |
0.2 |
pts |
5.3 |
% |
1.4 |
pts |
6.3 |
% |
2.2 |
pts |
4.4 |
% |
0.2 |
pts |
Underlying operating income |
1,009 |
|
68.8 |
% |
724 |
|
103.7 |
% |
323 |
|
11.9 |
% |
1,970 |
|
50.8 |
% |
1,477 |
|
74.9 |
% |
607 |
|
12.7 |
% |
Underlying operating margin |
5.3 |
% |
1.7 |
pts |
6.1 |
% |
2.5 |
pts |
4.5 |
% |
— |
pts |
5.3 |
% |
1.3 |
pts |
6.4 |
% |
2.1 |
pts |
4.3 |
% |
0.1 |
pts |
Diluted EPS |
0.65 |
|
114.3 |
% |
|
|
|
|
1.24 |
|
78.0 |
% |
|
|
|
|
Diluted underlying
EPS |
0.65 |
|
86.8 |
% |
|
|
|
|
1.24 |
|
64.3 |
% |
|
|
|
|
Free cash flow |
533 |
|
9.3 |
% |
|
|
|
|
1,761 |
|
396.0 |
% |
|
|
|
|
Comments from Frans Muller, President and CEO of Ahold
Delhaize"COVID-19 has presented adversity across society
and business. It has impacted our communities, associates,
customers, and their families. I would like to thank associates
across all our local brands and support offices for their
outstanding service during this crisis. Their agility and
dedication have ensured the safety of our stores and distribution
centers, sustained the strength of our supply chains, and helped
nourish families and local communities. I am grateful for the
commitment they have shown and continue to show. I am also pleased
that we were able to make important investments in additional
safety measures, enhanced associate pay and benefits, and
significant charitable donations, including to several local food
banks. Additionally, our brands hired more than 45,000 associates
globally in Q2.
"The engagement and strong execution of our teams have
translated this unprecedented demand in both the U.S. and Europe,
due to COVID-19, into outstanding results. These developments,
along with the benefit of comparing against the same quarter last
year, when we saw a negative impact from the strike at the Stop
& Shop brand in the U.S., have led to strong underlying
operating margin performance in the quarter.
"Our Q2 performance illustrates the challenge all companies are
facing in predicting results in the highly uncertain
environment created by COVID-19. Despite the high levels of market
uncertainty, we are accelerating investments to support our
increasing digital and omnichannel ambitions and raising our 2020
outlook due to our strong performance in the first half of the
year. We now expect that our group underlying operating margin will
be higher than in 2019, with underlying EPS growth in the
low-to-mid-20% range. We are also raising our free cash flow target
to at least €1.7 billion, net of paying the majority of the
recently announced tentative U.S. pension plan withdrawal
agreement.
"We continue to adapt to the changes we are seeing in consumer
shopping patterns and behavior. One of these changes is the
increased demand for our online offerings, which, combined with
investments to increase capacity, has resulted in net consumer
online sales growth of 127% in the U.S., at constant exchange
rates, and 64% in Europe. Our increased investments in digital and
omnichannel capabilities should lead to continued wallet share
gains. As a result, we now expect over 55% growth in global net
consumer online sales in 2020. This puts us on track to reach our
goal of doubling global net consumer online sales from €3.5 billion
in 2018 to €7 billion in 2020, one year earlier than we outlined at
our November 2018 Capital Markets Day.
"We also remain dedicated to health and sustainability in these
challenging times. During the second quarter, we published our
inaugural Human Rights Report, outlining the steps we are taking to
safeguard human rights. We also issued our first Sustainability
Bond Report in June 2020, documenting how we used bond financing
from 2019 to support sustainable products, reduce climate impacts
and promote healthier eating. We have subsequently announced our
commitment to achieve long-term, science-based targets on climate
change, including the goal to reduce our own carbon emissions by
50% by 2030 and a new goal to reduce emissions from our overall
value chain by 15%. After officially becoming a supporter of the
Task Force on Climate-related Financial Disclosures (TCFD), we are
in the process of developing voluntary and consistent
climate-related risk disclosures.
"Our second quarter results reflect excellent operational
execution by associates during the COVID-19 crisis. We will
continue to make protecting and investing in the health and safety
of associates and customers, as well as supporting our local
communities, our top priorities."
Q2 Financial highlights
Group net sales were €19.1 billion, up 17.1%, or 15.9% at
constant exchange rates, driven largely by 16.4% comparable sales
growth excluding gasoline. Group comparable sales were mainly
driven by demand related to COVID-19 and, to a lesser extent,
benefited from the comparison against Q2 2019, when the strike and
subsequent recovery at Stop & Shop in the U.S. unfavorably
impacted sales by 2.0 percentage points. Group net consumer online
sales grew 77.6% in Q2 at constant exchange rates. Group underlying
operating margin in Q2 was 5.3%, up 1.7 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 as well as lapping the roughly €90 million operating
profit headwind caused by the strike at Stop & Shop in the U.S.
in the prior year's quarter. This was offset in part by significant
costs related to COVID-19, which amounted to approximately €260
million in Q2, and approximately €330 million in the first half of
the year.
U.S. comparable store sales excluding gasoline grew 20.6%, with
all brands generating double-digit comparable sales growth. This
was due largely to the COVID-19 outbreak and the lapping of last
year's Stop & Shop strike, which unfavorably impacted Q2 2019
sales in the U.S. by 3.2 percentage points. Online sales in the
segment were up 126.8% in constant currency. U.S. underlying
operating margin was 6.1%, up 2.5 percentage points from the prior
year at constant exchange rates, driven largely by operating
leverage from higher sales growth due to COVID-19, as well as the
aforementioned Stop & Shop strike (roughly €90
million).
Europe's comparable sales excluding gasoline grew 10.2%, due
largely to demand related to COVID-19, slightly offset by an
unfavorable calendar shift impact of -0.1 percentage points in the
quarter. Net consumer online sales in the segment were up 63.9%.
Underlying operating margin in Europe was 4.5%, relatively flat
compared to the prior year. 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.
At bol.com, the online retail platform in the Benelux included
within the Europe segment's results, net consumer sales grew by
65.4%. Bol.com's third-party sales grew 107% in the quarter, with
nearly 34,000 merchant partners on the platform.
Ahold Delhaize's net income was €693 million, up 107.6% in the
quarter. Diluted EPS was €0.65, up 115.6%, and diluted underlying
EPS was €0.65, up 87.9%. Nearly 8.1 million shares were purchased
in the quarter for €183 million, bringing the total amount to
€519 million in the first half of the year. The 2020 interim
dividend is €0.50, up 67% versus the prior year, and represents 40%
of first half 2020 underlying income per share from continuing
operations.
Outlook
COVID-19 continues to create significant uncertainty for the
2020 outlook, though, due to the Company's strong performance in
the first half of the year, guidance for underlying operating
margin, underlying EPS, and free cash flow is being raised.
IFRS results will be unfavorably impacted by the withdrawal
agreement to the UFCW International Union – Industry Pension Fund
announced on July 21, 2020. If ratified by the UFCW Locals, the
transaction will be treated as an extraordinary item and will,
therefore, not impact the underlying operating results outlook for
2020.
Underlying operating margin is now expected to be higher than
2019 versus broadly in line with 2019 as previously expected.
Embedded in this margin outlook is a lower margin rate in the
second half of the year compared with the first half of the year.
This is due to the expectation that sales growth will moderate
relative to the first half of the year, which creates an operating
deleverage effect when factoring in significant ongoing costs
related to COVID-19 as well as investments in digital/omnichannel
capabilities.
The underlying EPS outlook for 2020, however, has been raised to
low-to-mid-20% growth from mid-single-digit growth.
The 2020 free cash flow outlook has also been raised to at least
€1.7 billion, compared to the previous outlook of over €1.5
billion, and now includes the effect of paying the majority of the
€583 million pre-tax obligation for a tentative agreement to
withdraw from the UFCW International Union – Industry Pension Fund
and contribute to the transition reserve for the new variable
annuity pension plan at Stop & Shop, which was announced on
July 21, 2020. The capital expenditure guidance of around €2.5
billion is maintained and now also 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.
|
Full-year outlook |
|
Underlying operating margin1 |
Underlying EPS |
Save for Our Customers |
|
Capital expenditures |
Free cash flow2 |
|
Dividend payout ratio3 |
Share buyback |
Updated Outlook |
2020 |
|
Higher than 2019 |
Low-to-mid- 20% growth |
€600 million |
|
~ €2.5 billion |
> €1.7 billion |
|
40-50% |
€1 billion |
|
|
|
|
|
|
|
|
|
|
|
|
Previous Outlook |
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, 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.
- 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 continue
(to), will, reach, goal, 2020, outlook, expect(ed), increase,
predicting, uncertain(ty)/(ties), accelerating, raising, guidance,
tentative, to, should, lead to, expect, on track, remain(s), if,
expectation, creates, ongoing, effect, 53rd week, 53-week basis,
risks, mitigate, impacted, focus on or ensuring, 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, pandemics 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 Q2 2020 Press release
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