Ahold Delhaize Preps to Hold Onto COVID Share Gains

While stocking shelves and fulfilling online orders remain the near-term focus at Ahold Delhaize, officials of the international retailer this week shared some details of how they are thinking about the long-term effects of the COVID-19 crisis, noting that investment in digital capabilities, a stronger alignment with health and sustainability, and continued focus on operations will factor in its ability to win share over time.

The conference call with analysts accompanied a review of financial results for Ahold Delhaize’s fiscal first quarter showing robust sales, comps and profit growth that were pre-announced last month. U.S. sales for the first three months of the year increased by 13.7% to $12.5 billion, with same-store sales excluding gasoline increasing by 13.8%. Online sales in the quarter grew by 42.3% to $357 million. Underlying U.S. operating margin jumped to 6.7% from 4.9% in last year’s first quarter, although officials cautioned the company was realizing a sales benefit ahead of increased operating costs.

The company said last month those costs—covering increased pay and safety measures in-stores—was approaching $200 million since the onset of the pandemic.

CEO Frans Muller said this week that Ahold Delhaize would remain focused on improving availability in-stores, proactively working with suppliers to lift in-stock levels in part through curtailing selections and utilizing idle capacity from foodservice counterparts to help overcome capacity bottlenecks.

While the supply in Europe is almost back to normal, “we still have a number of supply chain challenges” in the U.S., especially in hard-hit categories such as paper, sanitation, frozen foods and meat. He said meat from major plants was “slowly but surely improving,” but added, “it will take time” and could be subject to additional disruption if plant-based COVID outbreaks continue.

Ahold has also been working to increase online capacity, which had its own congestion issues as customers rushed to find delivery windows. Muller emphasized an increased focus on click-and-collect, which provided better economics for the company, and said the company now has plans to exceed a goal of 1,000 pickup locations for the fiscal year.

The company concurrently said it was aiming to achieve 50% online sales growth this year, vs. a previous goal of 30% growth.

Longer term, Muller said the company would devote approximately 3% of sales to capital expenditures with an eye toward retaining the “share of stomach” it has gained in the first weeks of the crisis.

Priorities include omnichannel capabilities behind proprietary solutions, store fleet improvements, meal solutions and private label offerings. Muller said Ahold Delhaize would separately look to spend behind mergers and acquisitions.

The company’s purchase of New York’s King Kullen chain was still in progress and now scheduled to close in the second half of the year.