Peapod sets sights on New York

A new warehouse opening this summer in New Jersey will allow Ahold’s Peapod division to double its current capacity and better serve around 21 million online and mobile shoppers around metro New York, Ahold officials said Thursday.

The 300,000-square-foot, semi-automated facility in Jersey City will “clearly focus on the demands of the New York City market,” Ahold CEO Dick Boer said in a conference call discussing Ahold’s financial results for the fourth quarter and fiscal year. “In the total market of New York City, which we can support from this new warehouse, are living 21 million people, so [there is] enormous opportunity for us to move in that market [and] accelerate our growth.”

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Boer said Ahold would also accelerate its rollout of pick-up points — drive-up facilities for customers who use Peapod to retrieve orders — this year, with a goal of 200 such facilities open.

Ahold recorded approximately $1.5 billion in online sales during 2013 between Peapod and online efforts in Europe — a 16.9% increase from 2012.

Boer said U.S. sales accounted for around two-thirds of the food sales not generated by bol.com in Europe, or around $550 million. Ahold’s online food sales grew by 13.5% for the year. Boer reiterated that these sales were “relatively neutral of profit,” particularly as the company invests in their growth.

“I wouldn't expect a significant contribution from the online business in terms of profitability, but we are optimistic about our ability to continue to expand the growth rates on online,” he said, adding that a mature online sales operation could see “low-single-digit” profitability. “But at the moment, we're in an investment phase and will continue to invest as we see the growth opportunities.”

Read more: 'Connected' customer key to Ahold's growth, says Boer

U.S. sales and operating income declined during the fourth quarter, as low inflation and competition particularly in New England and in the Washington-Baltimore area affected volumes, officials said. Sales for the period, as reported previously, declined by 2.1% to $6 billion, while non-fuel identical store sales declined by 2%.

For the fiscal year, U.S. sales of $26.1 billion increased by 1.1%, mainly a result of sales from acquired Genuardi stores in Pennsylvania, offset by the loss of sales due to Stop & Shop’s closure of its six stores in New Hampshire. However the company said it gained market share in 2013 as compared to 2012.

Boer had a “cautious” outlook for the 2014, citing gradual improvement in the economy and a continued focus on cost reductions. He said U.S. stores would focus harder on value, fresh and private brands, particularly in New England and in Washington. Ahold’s U.S. private brand penetration increased to 37% of sales in 2013 and is on track to reach 40% by 2016, Boer added.