E-commerce drives Ahold Delhaize in second quarter

Despite a continued strong e-commerce performance, sales growth moderated at Ahold Delhaize in the fiscal 2021 second quarter as the global food retailer lapped last year’s pandemic-fueled gains.

For the quarter ended July 4, Ahold Delhaize USA saw net sales edge up 2.7% to $13.4 billion from $13.04 billion a year earlier, Zaandam, Netherlands-based Ahold Delhaize said Wednesday. Comparable-store sales dipped 0.5% year over year and were down 1.5% excluding fuel.

That followed increases of 18.7% in net sales and 18.8% (20.6% excluding fuel) for comp sales in the 2020 second quarter and 3.6% in net sales and 1.5% (1.7% excluding fuel) for comp sales in the 2021 first quarter.

“The second quarter of 2020 was a particularly difficult quarter to comp against, as it represented the height of COVID-19 stock-up activity,” Ahold Delhaize CEO Frans Muller told analysts in a conference call on Wednesday. “In that light, I’m very proud of our second-quarter performance, in which U.S. comp sales excluding gas were only down 1.5% versus last year’s very robust sales levels, and our European comp sales excluding gas grew 2.4% year over year. On a two-year stack basis, U.S. and Europe comp sales grew 19.1% and 12.6%, respectively, both representing an acceleration versus 2020.”

Related:Ahold Delhaize USA’s new Mauldin distribution center gets up and running

Ahold Delhaize noted that the two-year quarterly comp-sales performance compares with growth of 15.8% in the U.S. and 12.3% in Europe for full-year 2020.

“This strong result comes against a backdrop in which several communities across our markets reopened during the second quarter, suggesting that new behaviors picked up by consumers during the COVID pandemic continue to be quite sticky, as demand for food at home remains very resilient,” Muller explained. “At the same time, our results also underscore that our operations are exiting the COVID pandemic in a stronger position, led by our omnichannel platform, which continues to drive strong market share during the quarter.”

Stores recently acquired by Food Lion are exceeding sales expectations, Ahold Delhaize reported.

Ahold Delhaize’s U.S. supermarket chains, located along the East Coast, include Stop & Shop, Giant Food, Giant/Martin’s, Food Lion and Hannaford, with e-commerce powered by the Peapod Digital Labs unit. In the second quarter, Food Lion continued to lead in performance among the retail banners, the company reported.

“We also remodeled 14 additional Stop & Shop stores in the second quarter, bringing the total number of stores remodeled since inception of the program to nearly 100, and we continue to see solid sales uplifts from our remodeled stores,” Muller said. “From a brand perspective, I’d like to call out Food Lion, which achieved its 35th consecutive quarter of positive comparable-sales growth. In addition, the 71 [acquired] stores that have been integrated year-to-date are exceeding sales expectations.”

Related:Ahold Delhaize sees U.S. online sales jump nearly 190% in Q1

At least 50 Stop & Shop remodels are expected to be completed this year, and The Giant Company is slated to continue opening new stores through 2023, with the Carlisle, Pa.-based chain reaching “a market leading position” in Philadelphia, Ahold Delhaize said.

Online sales at Ahold Delhaize USA climbed 61% to $908 million in the 2021 second quarter from $564 million a year earlier, propelled by expansion in pickup sites and the acquisition of online grocer FreshDirect. Excluding FreshDirect, U.S. online sales grew 29%, compared with a 126.8% gain in the 2020 quarter.

“Our U.S. online sales continue to grow at solid double-digit rate, even as we lap triple-digit growth in the year-ago period, when COVID drove a step change in the way our consumer shop, favoring online purchases,” Ahold Delhaize Chief Financial Officer Natalie Knight said in the call. “The early read-through suggests that elevated online grocery demand garnered during COVID-19 pandemic is having a positive and sustainable effect on our business. And we stand ready to continue our strong execution in this environment and continue to increase our investments in our digital and omni-channel capabilities.”

Plans call for 50 Stop & Shop stores to be upgraded during fiscal 2021.

In the U.S., Ahold Delhaize remains on track for more than 70% online sales growth in fiscal 2021, according to Muller. During the second quarter, the retailer launched 86 new pickup locations and is on pace to end 2021 with about 1,400 click-and-collect locations, up from 1,100 at the start of this year and 1,225 as of the quarter’s end.

“In support of our online fulfillment capacities, we are opening two new home-delivery centers in New York, which will go live in 2022,” Muller said.

Ahold Delhaize USA also deployed route optimization technology at its Giant Food and The Giant Company chains in July and plans further expansion to Stop & Shop in August. Also, as part of its U.S. supply-chain transformation, the company expects 65% of procured center store volume to be self-managed in integrated facilities — including physical stores and e-commerce — by end of 2021 and 85% by the close of 2022.

First-half U.S. net sales totaled $26.32 billion, up 3.1% from $25.52 billion in the fiscal 2020 half. Comparable sales inched up 0.5% (flat excluding fuel) versus a 16.1% gain (17.2% excluding fuel) a year earlier. Online sales jumped 110.4% to $1.94 billion from $921 million in the prior-year period.

Globally, Ahold Delhaize recorded second-quarter sales of €18.65 billion ($15.47 billion), down 2.4% ( 3% at constant exchange rates) from €19.1 billion ($17.36 billion) a year ago. First-half sales declined 1.1% ( 4.4% at constant exchange rates) to €36.91 billion ($30.64 billion) from €37.31 billion ($33.86 billion) in the prior-year period.

Companywide, online sales climbed by 34.5% (39.2% at constant exchange rates) to €1.81 billion ($1.5 billion) in the second quarter and by 61.7% (66.8% at constant rates) to €3.79 billion ($3.15 billion) for the first half. Net consumer online sales increased by 32.5% (35.8% at constant exchange rates) to €2.45 billion ($2.03 billion) in the quarter and by 60.6% (64.3% at constant rates) to €5.13 billion ($4.26 billion) for the half.

Second-quarter net income was €540 million, or €0.52 per share (continuing operations), compared with €693 million, or €0.65 per share, a year ago. For the first half, net income totaled €1.09 billion, or €1.05 per share (continuing operations), versus €1.34 billion, or €1.24 per share, in the 2020 half.

“Our online business posted strong double-digit growth in the second quarter and our underlying operating margins were very strong in the context of historical levels, prior to COVID-19. This has prompted us to once again raise our 2021 EPS guidance, reflecting the strength of our first-half-year results,” Muller said in the analyst call.

For fiscal 2021, Ahold Delhaize now projects high-teens growth in underlying earnings per share from 2019, compared with its earlier forecast of low to mid-teens growth.

Ahold Delhaize closed out the second quarter with 7,263 stores in the U.S., the Netherlands, Belgium and Central and Southeastern Europe, compared with 7,028 a year earlier, a net gain of 235. Ahold Delhaize USA saw 73-unit net gain in store count, expanding from 1,971 to 2,044 stores after 78 locations were opened or acquired and another five were closed or sold.