Throughout Q1 2024, our brands delivered value for customers despite continued economic challenges. Teams across all our brands worked diligently to mitigate inflation and keep healthy food affordable. We are beginning to see the benefits of structural changes related to the Belgium Future Plan and cost-saving initiatives implemented last year.
Group net sales for Q1 were €21.7 billion, up 1.3% at constant exchange rates and 0.4% at actual exchange rates. Comparable sales, excluding gas, increased by 1.6% for the Group, with a 0.8% rise in the U.S. and a 2.8% increase in Europe.
Net consumer online sales decreased by 1.0% at constant exchange rates in Q1, impacted negatively by 5.7 percentage points due to the divestment of FreshDirect. This decline was partially offset by double-digit growth at Food Lion and Hannaford and accelerating growth at Albert Heijn.
The underlying operating margin for Q1 was 4.0%, consistent with the prior year. While there were improvements in European performance, these were offset by modest declines in the U.S.
IFRS operating income for Q1 was €803 million, with IFRS diluted EPS at €0.54. IFRS results were €58 million lower than underlying results, primarily due to costs associated with the Belgium Future Plan.
Q1 diluted underlying EPS was €0.59, a 2.9% decrease compared to the prior year at actual rates.
The company reiterates its full-year 2024 outlook, including an underlying operating margin of ≥4.0%, underlying EPS at around 2023 levels, free cash flow of approximately €2.3 billion, and net capital expenditures of around €2.2 billion.
Zaandam, the Netherlands, May 8, 2024 – Ahold Delhaize, one of the world’s largest food retail groups and a leader in both supermarkets and e-commerce, reports first-quarter results today.
Summary of Key Financial Data
Comparable sales excluding gasoline, net consumer online sales, underlying operating income and related margin, diluted underlying EPS, free cash flow, and percentage changes at constant rates are alternative performance measures used throughout this report. For a description of these measures and a reconciliation between percentage changes and percentage changes at constant rates, see Note 13 (refer to Interim Report for notes) to the interim financial statements. Comparative amounts have been restated to conform to the current year’s presentation (see Note 2; refer to Interim Report for notes).
Comments from Frans Muller, President and CEO of Ahold Delhaize
I am pleased to report a stable first quarter, placing us well on track to reach our goals and aspirations for the year. The external environment remained challenging, similar to the second half of 2023. Our brands have been very active during the quarter in delivering great value, quality, and savings to customers, creatively using the full spectrum of their own-brand assortments and omnichannel toolkits.
Group net sales grew 1.3% at constant rates, while comparable sales excluding gas increased by 1.6%. These are strong results, especially considering the divestment of FreshDirect and the end of tobacco sales in the Netherlands. In the U.S., net sales declined by 0.6% at constant rates, while comparable sales growth excluding gas was 0.8%, positively impacted by calendar shifts. Net sales in Europe grew by 4.6% at constant rates, while comparable sales growth was 2.8%. Sales were supported by the timing of Easter and the cycling of the strike impact at Delhaize. The end of tobacco sales at Albert Heijn had a negative impact of 1.9 percentage points on Europe’s comparable sales growth.
As we prepare for our new strategic plan, we are working hard to ensure we are fit and ready to transition to a more robust growth profile. Simplifying our organization and maintaining a strong cadence in our Save for Our Customers program to sustain growth investments and drive innovation are key focus areas for both our regions. The largest of these simplification initiatives this year is the Belgium Future Plan. One year into the plan, the Delhaize team has made great progress and achieved many significant milestones. In February, Delhaize finalized agreements to franchise all of the 128 own-operated stores. To date, 76 stores have already transitioned to their new owners, and we expect all conversions to be completed by the end of the year. From the stores already transitioned, we are seeing promising results, with customer frequency and basket size trending upwards.
This will play an important role in European margin recovery in the coming years. Despite high levels of year-over-year cost inflation, I am pleased that we saw margin improvements during Q1 in Europe, with a 0.3 percentage-point rise. These improvements ensure we can maintain overall consistent margins at a Group level, while allowing us more flexibility to invest in our customer value propositions in the U.S., particularly in areas hardest hit by inflation and a reduction in Supplemental Nutrition Assistance Program (SNAP) benefits.
The impact can already be seen in our first-quarter profitability numbers, as we delivered a consistent underlying operating margin of 4.0%. As a result, diluted underlying EPS was €0.59, slightly lower than last year due to foreign exchange rates, higher financing expenses, and income taxes. On an IFRS basis, we delivered operating income of €803 million and diluted EPS of €0.54. IFRS results were negatively impacted by costs related to the transition of stores as part of the Belgium Future Plan.
In the U.S., our decision to orient our online fulfillment capabilities towards more efficient, less asset-intensive same-day delivery models, such as click and collect, is also paying off. Our online sales in the U.S. grew 4.7% in the first quarter on a like-for-like basis, fueled by new customer growth and strong retention of existing e-commerce customers. Driving more growth and leverage from our online capabilities is also a top priority for our European teams, as we continue to benefit from increasing demand and new external partnerships. For example, in the Benelux region, our brands are offering new, innovative propositions for business customers, with the ambition to offer quality and accessible services to a wide range of companies at an affordable price. Albert Heijn has entered new partnerships with large child care services and healthcare providers. The brand has also started offering all business customers a standard 10% discount on all organic products and items from AH Terra, Albert Heijn’s fully plant-based own-brand product line, as we extend our health and sustainability ambitions from the home to the workplace. Our strong grocery online sales growth of 10.7% in Europe in the first quarter underscores why our online business is such a powerful competitive advantage for our future growth in the region.
In line with Ahold Delhaize’s annual report, several of our brands issued sustainability reports during the quarter. These include many examples of the health and sustainability initiatives the brands have in place and are undertaking. To support the further reduction of our scope 3 carbon emissions, all our brands in Europe have now launched climate hubs to help suppliers set their own reduction targets. Ahold Delhaize USA launched a first supplier collaboration focusing on reducing carbon emissions, with several more to follow this year.
Given the solid start to the year, we reconfirm our guidance for 2024. It is an important year for our company as we pivot to our refreshed strategy, which we are very much looking forward to unveiling on May 23. With our strong market positions, our financial strength, and the great foundational work we have carried out over the last few years, I am confident we have a great starting point and strong plans for our next phase of growth.
Q1 Financial Highlights
Group Highlights
- Net Sales: Group net sales reached €21.7 billion, a 1.3% increase at constant exchange rates and a 0.4% rise at actual exchange rates. This growth was driven by a 1.6% increase in comparable sales excluding gasoline and the net opening of new stores, including the conversion of Jan Linders stores. These gains were partially offset by lower gasoline sales and the divestment of FreshDirect. Weather and calendar shifts contributed a net positive impact of approximately 1.2 percentage points, while the end of tobacco sales in the Netherlands had a 0.7 percentage point negative impact.
- Online Sales: Group net consumer online sales decreased by 1.0% at constant exchange rates, primarily due to a 5.7 percentage point negative impact from the FreshDirect divestment. This decline was partially mitigated by double-digit growth at Food Lion, Hannaford, and accelerating growth at Albert Heijn.
- Operating Margin: The underlying operating margin was 4.0%, consistent with Q1 2023. European performance improvements balanced modest declines in the U.S.
- Operating Income: IFRS operating income was €803 million, with an IFRS operating margin of 3.7%. IFRS results were €58 million lower than underlying results due to costs related to the Belgium Future Plan. Underlying income from continuing operations was €557 million, down 6.1% at actual rates. IFRS net income was €513 million. Diluted EPS was €0.54, and diluted underlying EPS was €0.59, a 2.9% decrease at actual currency rates. Ahold Delhaize repurchased 8.0 million shares for €214 million.
U.S. Highlights
- Net Sales: U.S. net sales were €13.3 billion, a 0.6% decrease at constant exchange rates and a 1.8% decline at actual exchange rates. Comparable sales excluding gasoline increased by 0.8%, with a 1.3 percentage point positive impact from weather and calendar shifts. Strong pharmacy growth was offset by the end of emergency SNAP benefits, moderated inflation rates, FreshDirect divestment, and lower gasoline sales. Food Lion and Hannaford continued strong performance with 46 and 11 consecutive quarters of positive sales growth, respectively.
- Online Sales: Online sales declined 10.1% at constant currency, impacted by a 14.8 percentage point negative impact from the FreshDirect divestment. This was partially offset by double-digit growth at Food Lion and Hannaford.
- Operating Margin: The underlying operating margin was 4.6%, down 0.2 percentage points due to higher costs for shrink, store labor, and hired services, partially offset by a margin mix benefit from the FreshDirect divestment. IFRS operating margin was 4.8%, with IFRS results €21 million higher than underlying results, partly due to gains from the sale of meat packaging facilities.
Europe Highlights
- Net Sales: European net sales were €8.5 billion, a 4.6% increase at constant exchange rates and a 4.1% rise at actual exchange rates. This growth was driven by a 2.8% increase in comparable sales and new store openings, including the conversion of Jan Linders stores. The cessation of tobacco sales in the Netherlands had a 1.9 percentage point negative impact, while calendar shifts and cycling of prior year strikes in Belgium added 0.8 and 0.7 percentage points, respectively.
- Online Sales: Net consumer online sales increased by 4.7%, driven by double-digit growth in grocery online sales.
- Operating Margin: The underlying operating margin was 3.2%, up 0.3 percentage points due to performance recovery in Belgium and lower energy costs, partially offset by higher labor costs and increased non-cash service charges for the Netherlands’ employee pension plan. IFRS operating margin was 2.2%, with IFRS results €80 million lower than underlying results due to costs associated with the Belgium Future Plan.
Outlook
Ahold Delhaize reiterates its 2024 outlook, expecting an underlying operating margin of 4.0% or higher. Underlying EPS is anticipated to be around 2023 levels at current exchange rates, with free cash flow projected at approximately €2.3 billion and net capital expenditures around €2.2 billion. Key factors impacting 2024 performance include:
- The FreshDirect divestment, reducing U.S. segment net sales and online sales by $600 million.
- The cessation of tobacco sales at Albert Heijn, affecting European sales by 2-3 percentage points.
- The anticipated closure of the Profi acquisition in the second half of 2024, doubling the size of operations in Romania.
Management remains committed to share buyback and dividend programs, closely monitoring macro-economic developments due to geopolitical unrest. These programs are subject to change based on corporate activities, such as significant M&A actions.
