Ahold Delhaize on Thursday said that difficult trading conditions in the U.S. continued – but didn’t worsen -- during the third quarter, with all banners continuing to feel effects of commodity led deflation, and Food Lion feeling the added impact of competitive price investments from Walmart.
The company overcame those pressures by driving modest volume increases and seeing underlying operating income dip slightly.
Walmart’s pricing activity affected Ahold Delhaize primarily in Food Lion’s Carolinas stronghold, essentially doubling the rate of deflation felt elsewhere in the chain, Ahold Delhaize CEO Dick Boer said in a conference call discussing results.
That said, Food Lion and Hannaford, the former Delhaize America banners, generated a 1.1% sales increase and comparable-store sales gains of 1.3% on a pro forma basis during the quarter, while underlying operating income fell by 6.9%.
Ahold USA’s banners — Stop & Shop, Giant-Landover and Giant-Carlisle — saw their sales increase by 2.4% in the quarter, with non-fuel comps of 0.3%. Sales growth in those banners were supported by acquired stores and the comp reflected positive impacts of improvements to the customer proposition, offset by commodity deflation of about 0.8%, Boer said. Underlying operating income in that division slipped by 1.9%.
Combined, the companies did $9.75 billion in net sales during the quarter ($5.9 billion at Ahold USA and $3.8 billion at Delhaize America).
“In the Northeast, we're certainly seeing input prices and sales deflation aligned,” Boer said. “And a bit more pressure in the sales of our markets in Food Lion because of the impact of Walmart.”
Boer emphasized that the pressure from Walmart did not accelerate during the quarter. Food Lion, which completed a 142-store market renewal around Charlotte, N.C. under its “Easy Fresh and Affordable” program, also drew competitive responses, he added.
Ahold USA in early October introduced lower everyday prices on 1,800 items as it worked to “close the gap” with competitors and shift emphasis from promotion to shelf price, Boer said. Its ongoing initiative to revamp bakery and produce departments at the chain was completed during the quarter.
