Dive Brief:
- Ahold Delhaize comparable U.S. sales grew by 3% compared to the previous quarter, excluding gasoline, according to a company's Q3 earnings report. Comparable sales were up 2.5% adjusted, which the company says is due to the impact of severe weather that Food Lion faced this quarter. The company reported positive online sales in the U.S., which rose 11.8% due to improving sales for Peapod.
- The company said its free cash flow rose from €112 million ($128 million) to €538 million ($617 million) and expect free cash flow to reach €2 billion ($2.3 billion) this year, increasing their guidance from the previous €1.9 billion ($2.1 billion). Ahold Delhaize says the increase in free cash flow will give the company a balance between investing into the business and returning excess liquidity to shareholders through their share buyback program.
- Net income increased by 26.7% over last year, to €459 million ($526 million), while operating income grew by 12.1% to €612 million ($702 million).
Dive Insight:
Ahold Delhaize’s Q3 earnings posted Wednesday beat analyst expectations, boosted mainly by online sales in the U.S., technological advancements and comparable store sales. Although the company’s earnings were positive, they were lower than last year's Q3.
In its Q2 earnings report, the company called out its Stop & Shop banner as being challenged. Now, Ahold Delhaize is hoping a chain refresh — beginning with 21 stores in Hartford, Connecticut — will improve results. The updates resulted in a 7% increase in headcount in the banner's stores. In today's earnings report, Ahold Delhaize called these $70 million updates the first step in its repositioning program.
The Hartford stores feature various combination of experience-focused features like taquerias, poke bowl stations, community-table diving, and an app-based checkout system. CEO Mark McGowan recently told Grocery Dive that the company hopes to "test and learn" over the coming months to figure out what works and what doesn't.
Store updates have become an increasing priority for Ahold Delhaize. Food Lion continues to see improving results due to a chain-wide store update around fresh and prepared foods. Giant, meanwhile, just introduced a new urban concept called Heirloom Market that could help the company unlock high-value markets like Philadelphia, where the updated store opened.
The company’s biggest online asset, Peapod, drove online sales growth, but those sales have actually slowed down year-over-year. By comparison, in Q3 last year the grocer’s online sales grew 20%. As other players are entering into the e-commerce grocery sector and existing ones are improving their business, Peapod is falling short.
However, in this morning's earnings call, Ahold Delhaize CEO Frans Muller said the company continues to invest in digital capabilities and technological advancements. In January, the company will pilot a small, automated fulfillment center in partnership with Takeoff Technologies to speed up delivery time at an updated Stop & Shop location in Windsor, Connecticut. In addition to the warehouse and in-store robots, Ahold Delhaize has been working on projects overseas as well, including tap-and-go technology in its Albert Heijen stores in the Netherlands.
All in all, the grocer has been pushing out innovations and lowering prices as it tries to keep pace on top trends like in-store experience, fresh foods and e-commerce. But compared to last year’s earnings and last quarter’s, the grocer's growth is lagging. Despite this, the company says it is still on track to reach €5 billion ($5.73 billion) in net consumer online sales by 2020.
