Ahold Delhaize Details Costs in COVID-19 Response as Q1 Sales Soar

Ahold Delhaize revealed this week that its price to fight the coronavirus is approaching $200 million and that those costs would eat into the rising margins associated with booming sales.

The Dutch retailer, which operates the Stop & Shop, The Giant Co., Giant Food, Hannaford and Food Lion brands in the U.S., has so far committed 170 million euros—about $185 million—on new safety measures for associates and customers; enhanced pay, benefits and hiring efforts; and charitable donations.

Preliminary sales figures from the retailer's fiscal first quarter indicate net sales growth of about 15%, or 13% in constant currency. Comparable sales growth, excluding gasoline, is expected to be up by about 14% in the U.S. and 10% in Europe.

Customer stockpiling in the first weeks of the COVID crisis in the U.S. sent comps up by 34% in the month of March. 

“We expect underlying operating margin in Q1 to be above the prior year. This is partly due to a timing effect. The Q1 margin has benefitted from the higher sales trends experienced at an earlier stage compared to the timing of the significant investments made enhancing associate pay and benefits and implementing additional safety and protective measures, which have become material toward the end of Q1,” Frans Muller, president and CEO of Ahold Delhaize, said in a statement.

The company said, however, it was maintaining its previously announced guidance for sales in profits in the fiscal year.

“In this time of acute need, we see people coming together across all our communities to help each other through this pandemic,” Muller said. “Ahold Delhaize and all our local brands in the U.S., Europe and Indonesia are taking substantial measures to ensure the safety of both associates and customers in response to the significant challenges created by the COVID-19 pandemic. Fighting this requires everyone’s support, and I am pleased with our efforts to date.”

Of the total investment, 44 million euros—or about $48 million—has gone toward additional safety and protection measures for associates, including the installation of Plexiglas barriers at checkout stands and new store flow patterns to enhance social distancing with new signs and markers in stores.

Another 20 million euros (about $22 million) has gone toward charitable donations and about half of that total went to local brands in the U.S., which in turn announced their own plans to distribute those funds locally. Ahold Delhaize has earmarked food banks, efforts to feed first responders in critically hard-hit areas, national and private health systems, the Red Cross and medical facilities to further research COVID-19 as beneficiaries of those donations.

Further investments are covering costs for bonuses, pay increases and enhanced benefits for workers across brands, as well as a commitment to hire an additional 40,000 workers. Ahold said its local brands are tackling that effort largely through partnerships with counterparts in disrupted service industries, which have seen tens of thousands of laid off or furloughed workers.

“I want to recognize the resilience and courage demonstrated by all the medical and emergency professionals working on the front line. Our own sector has also proven to be vital at this time—supported by associates across all our brands, in our supply chains and at our support offices," Muller added. “Their determined efforts and the care and teamwork they exhibit every day fill me with pride. I am both impressed and humbled by their actions in this time of great need. Finally, I am grateful to customers in all the communities we serve for respecting social distancing guidelines and local health regulations that help protect not only themselves but our associates as well.”