Ahold Delhaize sales growth increased to 2.1%, with strong synergy delivery resulting in margin expansion
Zaandam, the Netherlands, November 8, 2017 - Ahold Delhaize, a leader in supermarkets and eCommerce with market-leading local brands in 11 countries, continued to show strong performance during the third quarter of 2017 with increasing sales growth and improved margins.
Dick Boer, CEO of Ahold Delhaize, said: “We reported a strong financial performance again this quarter as margins increased significantly, driven by synergies while savings from our "save for our customers" programs are continuously being reinvested in the business. We continue to successfully implement our Better Together strategy and expect cumulative net synergies for the full year of 2017 to increase from €220 million to €250 million.
In the United States, inflation returned at low levels, and sales performance further improved. We gained market share across our brands in a competitive landscape with new entrants. Food Lion continued to report strong volume growth, supported by the rollout of its "Easy, Fresh & Affordable" strategy, whereas Stop & Shop New England benefited from a strong summer holiday season.
In Europe, our Dutch business continued to show good momentum with solid comparable sales growth and strong margins, driven by synergies and other cost savings. Albert Heijn further improved the quality of hundreds of own-brand products and was recognized for having the most attractive promotions, providing great value for customers. New products and services were introduced, such as a subscription option at ah.nl for home delivery, offering free of charge delivery at a fixed fee.
As part of our omni-channel strategy, we continue to enhance the leading position of our online businesses both in the U.S. and Europe, which in total grew more than 20% this quarter. We continue to invest in online warehouse capacity and are on track to realize almost €3 billion in online consumer sales this year and nearly €5 billion by 2020.
We are also investing to further improve our portfolios of own-brand products, providing healthy and convenient choices for customers and leveraging expertise from both sides of the Atlantic. This includes combining our Ahold USA and Delhaize America natural and organic own-brands with a total annual sales of $1 billion, into our Nature's Promise brand that we will introduce across our other businesses.
Moreover, we are building our digital capabilities and expertise and continue to invest to offer customers a personalized experience, both in our stores and online, using data analytics to develop digital loyalty programs and unique offers and promotions, benefiting from expertise and skills across our businesses. With the introduction of "My Hannaford Rewards" program, all our U.S. brands have now implemented a digital customer loyalty program.
We reiterate our guidance of €1.6 billion free cash flow for the full year 2017. Looking forward to 2018, we will maintain our balanced approach between managing our debt, funding growth and returning excess liquidity to our shareholders. For 2018, we expect free cash flow to increase and we anticipate capital expenditure to step up to €1.9 billion, focused on improving our store network, expanding our omni-channel offering and further developing our digital capabilities. In addition, we announced today a new 12 month €2 billion share buy back program starting at the beginning of 2018, reflecting confidence in our Better Together strategy.
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Forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and that may cause actual results of Koninklijke Ahold Delhaize N.V. (the “Company”) to differ materially from future results expressed or implied by such forward-looking statements. Such factors include, but are not limited to risks relating to competition and pressure on profit margins in the food retail industry; the impact of the Company’s outstanding financial debt; future changes in accounting standards; the Company’s ability to generate positive cash flows; general economic conditions; the Company’s international operations; the impact of economic conditions on consumer spending; turbulences in the global credit markets and the economy; the significance of the Company’s U.S. operations and the concentration of its U.S. operations on the east coast of the U.S.; increases in interest rates and the impact of downgrades in the Company’s credit ratings; competitive labor markets, changes in labor conditions and labor disruptions; environmental liabilities associated with the properties that the Company owns or leases; the Company’s inability to locate appropriate real estate or enter into real estate leases on commercially acceptable terms; exchange rate fluctuations; additional expenses or capital expenditures associated with compliance with federal, regional, state and local laws and regulations in the U.S., the Netherlands, Belgium and other countries; product liability claims and adverse publicity; risks related to corporate responsibility and sustainable retailing; the Company’s inability to successfully implement its strategy, manage the growth of its business or realize the anticipated benefits of acquisitions; its inability to successfully complete divestitures and the effect of contingent liabilities arising from completed divestitures; unexpected outcomes with respect to tax audits; disruption of operations and other factors negatively affecting the Company’s suppliers; the unsuccessful operation of the Company’s franchised and affiliated stores; natural disasters and geopolitical events; inherent limitations in the Company’s control systems; the failure or breach of security of IT systems; changes in supplier terms; antitrust and similar legislation; unexpected outcome in the Company’s legal proceedings; adverse results arising from the Company’s claims against its self-insurance programs; increase in costs associated with the Company’s defined benefit pension plans; and other factors discussed in the Company’s public filings and other disclosures.
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