Sales at Ahold Delhaize USA up by double digits in third quarter

Ahold Delhaize USA upheld double-digit net and comparable sales growth in its fiscal 2020 third quarter, with digital sales more than doubling in the period.

Also on Wednesday, Zaandam, Netherlands-based parent Ahold Delhaize announced a series of omnichannel initiatives for the U.S. business, including plans in 2021 to launch an “endless aisles” online marketplace across store banners and pilot a subscription membership program at The Giant Company, which operates Giant and Martin’s supermarkets.

For the quarter ended Sept. 27, Ahold Delhaize USA saw net sales climb 11.3% $12.69 billion from $11.4 billion a year earlier. Comp sales grew 11.4% year over year and were up 12.4% excluding fuel. Online sales surged 114.7% to $583 million from $272 million a year ago.

Ahold Delhaize attributed the U.S. comp-sales gain primarily to the impact of the COVID-19 pandemic. The company said Food Lion and Giant Food led a strong performance by the U.S. supermarket banners, including a good showing from Stop & Shop. U.S. underlying operating margin came in at 5%, up 0.6 percentage points from a year ago, driven mainly by operating leverage from higher sales growth due to the coronavirus crisis, offset in part by costs related to COVID-19.

Ahold Delhaize CEO Frans Muller said demand spikes triggered by the pandemic are leading the global retailer to accelerate the expansion of its online capacity, supply chain and technological capabilities, namely in the U.S., the company’s largest business segment.

Related:Podcast: Ahold Delhaize USA up to online grocery challenge, e-commerce chief JJ Fleeman says

“Our U.S. business reaches approximately 90% of households in our markets with home delivery and click-and-collect and around 70% with same-day [delivery] options. In 2020 and 2021, cumulatively, we are increasing our online capacity by nearly 100% in the U.S.,” Muller told analysts in a conference call on Wednesday. “This includes the expansion to nearly 1,400 Click & Collect locations by 2021, which will double the number of locations we had at the beginning of 2020.”

Upgraded prepared-food areas offering fresh-made and grab-and-go meals are part of the store remodels at Stop & Shop.

Ahold Delhaize USA, which also includes the Hannaford grocery chain and Peapod Digital Labs unit, finished the third quarter with 883 online grocery pickup sites, up from 700 at the start of the year. But Muller said in the call that the company has “a lot of exciting advancements for omnichannel consumers in the U.S. with many, many more to come.”

“Our brands have offered subscription plans for years, and they have quite a loyal following by consumers. But we always look to improve our offerings. Therefore, The Giant Company will test a new subscription offer in the first quarter of next year, with an annual membership fee under $100, improved value proposition and preferential delivery slots. We believe this improved subscription offering should lead to both increased loyalty and engagement,” he explained. “The U.S. will also offer an endless aisle solution with an additional 80,000 to 100,000 general merchandise and food items in the first half of next year, utilizing the Mirakl platform.”

Related:Ahold Delhaize USA readies six facilities for self-distribution in 2021

Boston-based Mirakl specializes in the creation of B2C and B2B digital marketplaces allow third-party vendors to sell directly to customers. The e-commerce provider also has partnerships with The Kroger Co. and Albertsons Cos.

Inside stores, Ahold Delhaize USA also plans to boost its private-label offering. Plans call for its supermarket banners to launch 1,500 to 2,000 more own-brand items in 2021, adding to the current base of 15,000 items.

The retailer, too, aims to step up the ongoing store remodeling program at Stop & Shop. In 2021, 60 more Stop & Shop locations will be upgraded, building on the 30 remodels expected to be completed this year.

“The remodeled stores are performing well, with sales lifts in line with our expectations,” Muller said. In response to an analyst’s question, he estimated that sales at the remodeled Stop & Shop stores were doing 3% to 4% better than existing stores on a like-for-like basis amid the pandemic.

“So we’re very happy with that performance. That’s why this year roughly 30 stores more, and for next year 60 remodelings in specific clusters for Stop & Shop,” Muller said. “We’re very confident that the team has found out what customers like the most after the first batches of experiments in Connecticut and Long Island [N.Y.].”

Globally, Ahold Delhaize posted third-quarter sales of €17.83 billion ($15.28 billion), up 6.8% (10.1% at constant exchange rates) from €16.69 billion ($15 billion) a year earlier. Companywide, online sales rose 56.9% (59.1% at constant exchange rates) to €1.33 billion ($1.14 billion). Net consumer online sales climbed 60.9% (62.6% at constant exchange rates) to €1.78 billion ($1.53 billion).

Net earnings for the 2020 third quarter totaled €68 million, or €0.06 per diluted share (continuing operations), compared with €453 million, or €0.41 per share, a year ago. Ahold Delhaize noted that the decrease reflects a previously announced €577 million provision for a U.S. pension plan withdrawal. Underlying income from continuing operations was €530 million, or €0.50 per diluted share, versus €488 million, or €0.44 per diluted share, in the prior-year period.

Ahold Delhaize closed out the third quarter with 7,028 stores in the U.S., the Netherlands, Belgium and Central and Southeastern Europe, compared with 6,878 a year earlier, reflecting a net gain of 190. Ahold Delhaize USA had 1,970 stores at the quarter’s end, for a net decrease of one after 11 locations were opened or acquired and another 12 were closed or sold.

For our most up-to-date coverage, visit the coronavirus homepage.