Dive Brief:

• Ahold Delhaize on Wednesday reported weaker financial performance in the U.S. during the third quarter of 2023 than it did during the same period last year, as several key metrics lost momentum.
• The grocer’s U.S. operations posted comparable sales growth excluding fuel of 0.9% in constant exchange rates during Q3, well below last year’s level of 8.2%, while net sales growth and operating income for the region also came in lower year over year.
• Ahold Delhaize’s operations were impacted during Q3 by factors including reduced federal nutrition funding, higher interest rates and the resumption of student loan payments, CFO Jolanda Poots-Bijl said during an earnings call.

Dive Insight:

Ahold Delhaize saw its U.S. performance sag during its latest quarter even as the company focused on value and grew its omnichannel operations, according to the company. The reduction in SNAP benefits alone shaved about 4 percentage points off its sales growth in Q3, Poots-Bijl said during the call.

U.S. net sales grew 0.5% during Q3 to 13.6 billion euros ($14.6 billion). By comparison, net sales were up 8.8% year over year during the third quarter of 2022. Meanwhile, Ahold Delhaize’s operating income in the U.S. was off 23.2% during its most recent quarter, a much larger drop than the 9.3% decline the company saw during last year’s Q3.

Ahold Delhaize, which runs banners including Food Lion, Giant Good, The Giant Company, Hannaford and Stop & Shop, expects the margin pressure it has been experiencing to dissipate “in a couple of quarters” as its effort to work with vendors on volume support incentives, reduce shrink and make other operational improvements bear fruit, said Poots-Bijl, who joined Ahold Dellhaize earlier this year.

Ahold Delhaize has been able to leverage its private label and focus on value to help contend with the pressure SNAP benefit reductions have recently put on its sales, CEO Frans Muller said during the earnings call.

Muller said Ahold Delhaize is not overly worried about the impact SNAP benefit reductions are having on its business. “I think you’ll hear other colleagues in the business talking about these kinds of things as well. So it's a market phenomenon. We are going to deal with this, and I would not attach more than that,” he said.

Ahold Delhaize’s U.S. online sales rose 4.4% during Q3 to just over 1 billion euros. By comparison, digital sales grew 20.8% during the same period last year. 

The Dutch grocery store operator’s e-commerce results benefited from double-digit growth recorded by Food Lion and Hannaford. Food Lion saw digital sales growth of 8% year over year during Q3, which was also the 44th quarter in a row during which it saw comparable store sales rise, Poots-Bijl said.

Ahold Delhaize also said Wednesday that it is selling its FreshDirect online grocery business to Turkish e-commerce company Getir.

Ahold Delhaize agreed to buy a controlling stake in FreshDirect in 2020, a move Ahold Delhaize CEO Frans Muller said at the time would enhance its omnichannel proposition. But the company had to take a 187 million-euro impairment charge during the third quarter of 2022 stemming from its decision to reduce FreshDirect’s operations.