Dive Brief:

• Ahold Delhaize’s U.S. retail brands have “increased their momentum” over the course of this year amid high inflation and supply chain constraints, Chief Financial Officer Natalie Knight said during the company’s second quarter earnings call Wednesday. Food Lion led growth among the banners, while chronic underperformer Stop & Shop increased its comp sales.
• The grocery company’s U.S. business reported a 6.4% increase in comparable sales, partly driven by favorable calendar shifts. Net sales increased 7.7%, to around $14 billion, while online sales grew 16.4%.
• The company’s performance in the first half of the year has exceeded its expectations, and, as a result, it raised its guidance for earnings per share and free cash flow.

Dive Insight:

Even as grocery price increases have climbed into double digits, supermarket operators are showing they’re able to keep shoppers flowing into their stores and digital platforms through a combination of pointed promotions and strategic pricing strategies.

Ahold Delhaize executives said that offering more opening price points and personalized promotions is helping its retail brands reach price-sensitive customers. Its U.S. stores served up 5.3 billion personalized offers to shoppers in Q2, CEO Frans Muller said during Wednesday’s earnings call.

The company’s U.S. retail brands, which include Food Lion, Stop & Shop, Hannaford, FreshDirect, Giant Food and The Giant Company, are also capitalizing on high demand for private label products. Around 30% of the assortment across those U.S. banners are store brands, and companies are marketing those options more assertively in stores and online as consumers increasingly comparison shop, said Muller.

In addition, Ahold Delhaize’s U.S. stores are offering more deals centered on prepared foods and at-home meal prep. Food Lion rolled out a daily Meal Deal in Q2 that offers ingredients to feed a family of four for $12, while Hannaford redesigned its Time Savers meal-prep program to focus more on affordable options.

In prepared remarks, Muller noted the “stickiness of food-at-home consumption” as one of the trends driving sales increases for the company.

Food Lion reported another quarter of positive comparable sales, continuing a streak that stretches back several years and is driven by the company’s store remodeling initiative. Meanwhile, Stop & Shop, a perennial underperformer among Ahold Delhaize’s U.S. stable, is delivering better results as it tries to accelerate its own remodeling program, which got bogged down during the pandemic. 

So far, Stop & Shop has remodeled 145 of its 400 or so stores, Muller said, with an eye toward offering more relevant assortments and a more attractive store design.

Ahold Delhaize’s strong earnings follows a similarly sunny report from fellow supermarket operator Albertsons late last month. Ahold Delhaize raised its guidance on Wednesday, noting that it now expects earnings-per-share growth for the fiscal year to be in the mid single digits, compared to an earlier projection of a low- to mid-single digit decline in the metric.

The company also raised its outlook for free cash flow, and now expects to have more than $2 billion on hand compared to its previous outlook of around $1.7 billion.