Price cuts pressure Q4 margins at Ahold DelhaizePrice cuts pressure Q4 margins at Ahold Delhaize

Ahold Delhaize on Wednesday said price investments in the U.S. contributed to a profit squeeze in the fourth quarter, while store closures and the divestment of FreshDirect had a negative impact on sales.

The Zaandam, Netherlands-based company said net fourth-quarter sales in its U.S. division, which includes Hannaford, Stop & Shop, Food Lion, and Giant Food, were down 0.6%, to $14.8 billion. Sales were negatively impacted by the closure of 32 Stop & Shop stores, the divestment of FreshDirect, and lower gasoline sales. Comparable-store sales excluding gasoline rose 1.4% in the U.S., which included a positive impact of 0.2 percentage points due to weather and calendar shifts. The company also credited ongoing pharmacy growth as a driver of comp-store sales gains.

Although U.S. operating income rose 30.1% in the fourth quarter, to 568 million euros (US$590 million), underlying operating margin in the U.S. was down 1 percentage point, to 4.2%, which the company attributed to price investments at Stop & Shop, a negative impact from a change in sales mix, wage inflation, and lower non-recurring items.

Online sales shine

Ahold Delhaize said its overall online sales growth remained solid in the fourth quarter despite a drop in online sales in the U.S. following the sale of its FreshDirect division. In the U.S., online sales growth was down 0.9% at constant exchange rates, to just over 1 billion euros, or about US$1.1 billion.

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The company said overall online sales growth was up 5.8% in Q4, driven by 10.8% online sales growth in Europe. Companywide online sales growth would have been up in double digits if not for the sale of FreshDirect, which was completed in December 2023. That divestment, to rapid-delivery company Getir, had a negative impact of 5.1 percentage points for the quarter and 6.9 percentage points for the full year.

The company said its partnership with third-party delivery company DoorDash was helping buoy online sales in the U.S.; DoorDash orders were up 20% in Q4, relative to Q3, the company said. 

By the numbers

• Ahold Delhaize reported fourth-quarter sales growth of 0.6% at constant exchange rates, to 23.3 billion euros (about US$24.3 billion). Excluding the impacts from the divestment of FreshDirect, the closure of the Stop & Shop stores, and the end of tobacco sales in the Netherlands, net sales growth would have been 2.1 percentage points higher, the company said.

• Underlying operating margin for the company overall was 4.1% in Q4, a decrease of 0.2 percentage points.

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• For the full year, the company reported sales growth of 0.9% at constant exchange rates, to 89.4 billion euros, or about $93.1 billion. The U.S. reported a sales decline of 0.7% for the full year, to $58.6 billion.

• The closure of underperforming Stop & Shop stores, which was completed last year, is expected to have a negative impact of between $550 million and $575 million on 2025 net sales. 

• The company forecasted underlying operating margin of around 4% and mid- to high-single-digit underlying growth in earnings per share.

In their own words: U.S. volumes return positive

"In the U.S., we saw volumes return to positive territory, capped off by strong holiday sales.” — Frans Muller, president and CEO, Ahold Delhaize