Dive Brief:

• Comparable sales at Ahold Delhaize's U.S. banners grew 1.7% during the first quarter of 2021 compared with the same period last year, the grocer announced on Wednesday morning. Measured against Q1 of 2019, comparable store sales in the United States were up 15.5%.
• Net sales in the United States rose 3.6% to 10.7 billion euros ($13 billion) during Q1. Meanwhile, digital sales in the U.S. rose 188%, including revenue contributed by e-grocer FreshDirect, which Ahold Delhaize acquired in January.
• The grocery conglomerate has seen its U.S. operations grow behind the strength of Food Lion, its fastest-growing stateside banner.

Dive Insight:

As its year-over-year results begin to overlap with the pandemic that took hold in 2020, Ahold Delhaize reported a slight gain in identical-store sales, in contrast to other grocers that have recently reported downturns in the all-important metric. President and CEO Frans Muller noted in a statement that this is a reflection of the business being stronger in 2021 than it was last year. 

When comparing U.S. same-store sales on a two-year basis, Ahold Delhaize saw an increase of 2 percentage points in Q1 compared with the last quarter of 2020, Chief Financial Officer Natalie Knight said during the call. The company has raised its expectations for underlying earnings per share growth in 2021 [compared with 2019] as a result of the quarter-to-quarter improvement, Knight said.

Food Lion is in a position to make "considerable market share gains," owing in part to the way the company positioned the banner to respond to the population and economic trends in the Southeast, Muller said during the company's earnings call. The grocery brand has integrated all of the 62 stores it agreed last year to acquire from Southeastern Grocers, Muller said. It also acquired and opened nine additional stores that were closed by Southeastern, he said.

E-commerce has been a particular area of strength for Ahold Delhaize. The grocer now offers same-day online grocery service through pickup and delivery to about 95% of its U.S. customer base, Muller said, calling the development a "big step forward compared to the last quarter and the last year." Click-and-collect is growing more quickly than delivery and is more profitable, and it now accounts for more than half of the company's online sales in the U.S, he said.

Ahold Delhaize expects online sales across its U.S. banners to increase by 70% in 2021, up from the company's previous estimate of 60%. "I think we are well-positioned there both from a growth perspective and capacity perspective," Muller said.

Muller said he is pleased with the early "robust" results Ahold Delhaize is seeing from FreshDirect, the New York City-area e-grocer it acquired earlier in 2021.

"I'm quite impressed by the professionalism, the pure-play game, but also the high loyalty of the customer base … their strong position in Manhattan and the tri-state New York [area] and their initiatives to grow the business," Muller said, adding that fresh orders account for 60% of the unit's total sales.

Ahold Delhaize, which runs stores under banners including The Giant Company, Giant Food, Hannaford and Stop & Shop, in addition to Food Lion, also plans to launch an online marketplace with 100,000 general merchandise and grocery items during the second half of the year. The endless-aisles service, known as Ship2Me, will put Ahold Delhaize up against retailers like Kroger, Amazon and Walmart, which already run digital stores that feature general merchandise in addition to food.

The marketplace is intended to help Ahold Delhaize take advantage of "the extra money incremental margin opportunity of general merchandise with the frequent shopping that we experience in our stores," Knight said during the call.

Muller said Ahold Delhaize is especially focused on owning its relationships with customers and is investing in technology to help maintain control of the data it collects from online shoppers. "It's strategically important that we have proprietary fulfillment and proprietary front-end software [and that] the data remain ours with the consent of our consumers," he said.

The company also plans to expand the artificial intelligence-based forecasting and replenishment technology it rolled out at Food Lion and Hannaford last year to Giant Food, The Giant Company and Stop & Shop this year.

Ahold Delhaize is also keeping an eye on inflation in the United States and plans to manage 65% of its procured center store volume on its own by the end of the year, up from 40% in 2020. "In a period where we need to get our supply chain we're aligned in an omnichannel world that's important in a time where inflation is an issue we have more in our own control," said Knight.