Press release
Ahold Delhaize reports Q1 results significantly impacted by COVID-19
- Net sales were €18.2 billion, up 14.7%, or 12.7% at constant exchange rates
- In the U.S. and Europe, comp sales growth excluding gas was up 13.8% and 9.8%, respectively
- Net consumer online sales grew 37.7% at constant exchange rates
- Operating income was €964 million, up 40.0% at constant exchange rates
- Underlying operating margin was 5.3%, up 0.9% points from the prior year
- Diluted underlying EPS was €0.59, up 49.5%; diluted EPS was €0.59
Zaandam, the Netherlands, May 7, 2020 – Ahold Delhaize, one of the world’s largest food retail groups and a leader in both supermarkets and eCommerce, reports first quarter results today.
The Interim report for the first quarter 2020 can be viewed and downloaded at www.aholddelhaize.com.
Summary of key financial data
Comments from Frans Muller, President and CEO of Ahold Delhaize
"I greatly admire the dedication shown by the associates across our brands, who have stepped up to serve their local communities in the face of the immense challenges arising from the COVID-19 crisis. We remain relentlessly committed to protecting the health and safety of associates and customers, and living up to our values, two of which are 'care' and 'teamwork.'
"Clearly, our Q1 sales performance across all geographies was impacted by the unprecedented demand and pressures created by the COVID-19 outbreak. We have responded by implementing additional safety and protective measures, enhancing associate pay and benefits, and making charitable donations to support local communities. The costs related to our efforts will more significantly impact subsequent quarters. Nevertheless, we maintain our full-year outlook that our group underlying operating margin will be broadly in line with 2019.
"Protecting the health and safety of our associates and customers remains our first and foremost priority, along with operating our brands and supply chains smoothly. We will keep monitoring and learning from changes in consumer shopping patterns and behavior. While it is still too early to know which paradigm shifts will emerge from the COVID-19 crisis, we continue to prioritize investments in accelerating our digital and omnichannel capabilities, as well as improving our store fleet, in order to grow our share of wallet.
"Separately, I'd like to welcome Natalie Knight, who was appointed as our CFO on April 8. With her demonstrated leadership in financial discipline and business transformation efforts, she is ideally qualified to help us accelerate our Leading Together strategy."
Q1 Financial highlights
Group net sales were €18.2 billion, up 14.7%, or 12.7% at constant exchange rates, driven largely by 12.2% comparable sales growth excluding gasoline. Group comparable sales were favorably impacted by 26.9% growth in March due primarily to COVID-19, and unfavorably impacted by -0.3% points due to the net effect of a weather and calendar shift in the quarter. Group net consumer online sales grew 37.7% in Q1 at constant exchange rates. Group underlying operating margin in Q1 was 5.3%, up 0.9% points from the prior year, benefiting largely from the timing of unexpectedly higher sales that preceded the timing of significant investments related to COVID-19. This was a phenomenon that was more pronounced in the U.S. than in Europe, as Europe experienced earlier customer stockpiling in late February, and therefore saw earlier investments related to COVID-19, while the U.S. experienced later stockpiling in March.
U.S. comparable store sales excluding gasoline grew 13.8%, with all brands generating double-digit comparable sales growth due largely to the COVID-19 outbreak. Comparable sales were favorably impacted by 33.8% growth in March due primarily to COVID-19, and unfavorably impacted by less severe winter weather, which amounted to -0.8% points in the quarter. Online sales in the segment were up 42.3% in constant currency. U.S. underlying operating margin was 6.7%, up 1.7% points from the prior year, driven largely by the aforementioned timing benefit from higher sales preceding material COVID-19-related investments.
Europe's comparable sales excluding gasoline grew 9.8%, to a significant degree due to the COVID-19 crisis. Comparable sales were favorably impacted by 15.9% growth in March due primarily to COVID-19, and were also impacted by a calendar shift benefit of +0.4% points in the quarter. Net consumer online sales in the segment were up 36.3%. All countries in Europe experienced higher than normal demand, though in the central and southeastern European countries, demand grew slightly faster than the overall segment. Underlying operating margin in Europe was 4.1%, up 0.1% points from the prior year. The aforementioned timing benefit from higher sales preceding material COVID-19 investments was less pronounced in Europe, and the benefit was offset partly by higher pension expense in the Netherlands, amounting to €11 million, as well as additional planned investments in digital and omnichannel capabilities.
At bol.com, the online retail platform in the Benelux included within the Europe segment results, net consumer sales grew by 39.5%. Bol.com's third party sales grew 66% in the quarter with nearly 21,000 merchant partners on the platform.
Net income was €645 million, up 48.2%. Diluted EPS was €0.59, up 54.9%, and diluted underlying EPS was €0.59, up 49.5%.
Outlook
We maintain our full-year outlook, as updated on April 7. While COVID-19 has created uncertainty for the 2020 outlook, COVID-19 related investments became material at the end of Q1 and will become significantly more visible in subsequent quarters. We expect 2020 free cash flow to be above €1.5 billion. The upside is mainly related to strong levels of free cash flow generated in Q1, rather than delays in capital spending, as we had previously indicated. While some capital projects will inevitably be delayed, we are accelerating investments in digital and omnichannel capabilities. We remain committed to our dividend policy and share buyback program, but given the uncertainty caused by COVID-19, we will continue to monitor macroeconomic developments.
- WebcastNo significant impact to underlying operating margin from the 53rd week, though the 53rd week should benefit net sales for the full year by 1.5-2.0%. Comparable sales growth will be presented on a comparable 53-week basis. As previously communicated, there will be margin dilution related to €45 million in transition expenses from the U.S. supply chain initiative, and an increased non-cash service charge of €45 million for the Netherlands employee pension plan, resulting from lower discount rates in the Netherlands.
- Excludes M&A
- Calculated as a percentage of underlying income from continuing operations
