E-commerce helps Ahold Delhaize to strong fiscal-year finish

Dutch retail giant Ahold Delhaize cited e-commerce as a catalyst, especially in the United States, in reporting solid sales gains for the 2019 fourth-quarter and fiscal year.

Also on Wednesday, Chairman and CEO Frans Muller told analysts that the global food retailer is seeing results from store upgrades and omnichannel investment in the U.S., including remodels at Stop & Shop and Food Lion and the ongoing rollout of online grocery pickup sites.

Muller, too, shed light on the planned closing of Peapod’s Midwestern division. Ahold Delhaize USA announced late yesterday that the Chicago-based e-commerce unit — serving online grocery customers in Illinois, Wisconsin and Indiana — is scheduled to be shut on Feb. 18.

Ahold Delhaize Chairman and CEO Frans Muller. (Photo by Russell Redman)

"We will continue to increase our focus and resources on the East Coast by closing the [Peapod] Midwest online grocery sales operation, which is a market where we don’t have a leading store base, which is crucial to executing on our omnichannel strategy,” he said in a conference call Wednesday. “Peapod Digital Labs, which is our digital and e-commerce innovation center, will continue to provide solutions for our U.S. East Coast business. The omnichannel brands and technologies will continue to drive our growth on the East Coast.”

Related:Ahold Delhaize USA’s Peapod Midwest division to close

For the fourth quarter ended Dec. 29, net sales at Ahold Delhaize USA rose 2.7% to $11.47 billion from $11.17 billion a year earlier. Comparable-store sales excluding fuel grew 2.3%. That growth would have been 2.6% backing out year-over-year weather impacts, due to a net benefit resulting mainly from winter storms in the previous year, the company said. Online sales jumped 42.7% to $330 million from $232 million a year ago.

Full-year U.S. net sales came in at $44.84 billion, up 1.5% from $44.17 billion in fiscal 2018. Online sales for fiscal 2019 surged 24.3% to $1.1 billion from $886 million in the prior year.

Operating income for Ahold Delhaize USA, at constant exchange rates, declined by 1.5% to $490 million in the fourth quarter and by 3% to $1.87 billion for the fiscal year. Underlying operating margin in the quarter dipped 0.4% to 4.3% versus a year ago. The company said the margin pressure reflects “a challenging sales environment” at Stop & Shop and additional investments in the brand, partially offset by increased margins at Food Lion, Giant/Martin’s and Hannaford.

“Overall, our brands continue to innovate in digital and e-commerce, as well as at our stores, in order to meet the evolving needs of our customers. You have seen these efforts materialize in our strong sales results,” Muller said in the call.

Related:Ahold Delhaize USA plans major supply-chain expansion

“The Re-imagine Stop & Shop program continues to build momentum, with sales in Long Island [N.Y.] and Hartford [Conn.] performing in line with expectations. In 2020, we expect to remodel another 65 Stop & Shop stores,” he explained. “We're also proud of the recognition Giant Heirloom Market has received for the innovative store format and are pleased that the remodels at Food Lion continue to help us gain share.”

On the e-commerce side,  Ahold Delhaize USA ended fiscal 2019 with 692 online grocery pickup points, surpassing its target of 600 click-and-collect sites.

“We currently have a strong platform, which is generating high levels of sales growth, and we plan to continue to build on that strong momentum. We expect to accelerate our online sales to over 30% in 2020, and we will grow our click-and-collect points from 692 at the end of 2019 to around 1,000 by the end of 2020. Eighty-six percent of our customers now have access to either delivery or click-and-collect options for their purchases,” Muller said. “This reflects the confidence we have in our omnichannel strategy, which is underpinned by having leading brands with No. 1 or 2 share, and providing convenient options to our consumers — whether that is in-store with frictionless checkout and the same-day click-and-collect offering, or through same-day or next-day home delivery.”

Ahold Delhaize expects to wrap up the acquisition of King Kullen by mid-2020. The deal to buy the Long Island, N.Y., grocery chain was announced early last year.

Ahold Delhaize reported that it expects to finalize its acquisition of Bethpage, N.Y.-based King Kullen Grocery Co., announced in January 2019, in the first half of 2020, pending customary closing conditions. The agreement includes 29 King Kullen 29 supermarkets, five Wild by Nature stores and King Kullen’s corporate offices in Bethpage. Some King Kullen stores have been closed since the transaction was announced.

Globally, Zaandam, Netherlands-based Ahold Delhaize posted fourth-quarter sales of €17.38 billion ($15.71 billion), up 5% (3.1% at constant exchange rates) from €16.55 billion ($14.51 billion) a year earlier. Fiscal 2019 sales advanced 5.5% (2.3% at constant exchange rates) to €66.26 billion ($59.88 billion) from €62.79 billion ($55.05 billion).

Net income in the quarter was €544 million, or €0.50 per share (continuing operations), compared with €509 million, or €0.45 per share, a year ago. For full-year 2019, net earnings totaled €1.77 billion, or €1.60 per share (continuing operations), versus €1.8 billion, or €1.53 per share, in 2018. Operating income rose by 9.4% (7.4% at constant exchange rates) to €749 million for the quarter and by 1.5% to nearly €2.66 billion for the year, though the latter represented a 1.5% decline at constant exchange rates.

Companywide, net consumer online sales climbed by 30.9% (30.1% at constant exchange rates) to about €1.44 billion in the fourth quarter and by 30.1% (28.6% at constant rates) to €4.55 billion for the 2019 fiscal year.

“We ended 2019 on a high note, with strong fourth-quarter results and significant growth in online sales, particularly in the U.S. We met or beat many of our key goals and have made significant progress against key targets provided since the Capital Markets Day in November 2018,” Muller told analysts in the call. “And in 2020, we will make investments to strengthen our local brands in order to accelerate our growth, and our teams will help consumers in the communities we serve to eat well, save time and live better.”

As of the fiscal 2019 year-end, Ahold Delhaize had 6,967 stores in the U.S., the Netherlands, Belgium and Central and Southeastern Europe, compared with 6,769 a year ago, reflecting a net gain of 198. Ahold Delhaize USA finished the year with 1,973 stores, a net increase of 12 from 1,961 in 2018.