Thanks in part to cost savings and improved Delhaize performance in Belgium, Ahold Delhaize can look back on a strong first quarter, with higher profitability in Europe.
Better margins
With quarterly sales of 21.7 billion euros and operating profit of 861 million euros, Ahold Delhaize exceeded the expectations of most observers. Especially good news for the retailer is the better performance in Europe, where the underlying operating margin rose from 2.8% to 3.2%, while in the US it remained stable at 4%. Net profit did fall, partly due to restructuring costs in Belgium.
The group is reaping the benefits of cost savings initiated last year and structural simplifications in the organisation, says top executive Frans Muller. The most significant intervention was Delhaize’s Future Plan in Belgium, which involves transferring all 128 integrated branches to independent operators. This led to wildcat strikes in the spring of 2023, but in the meantime the implementation of the plan is proceeding without incident and the prospects appear excellent.
Promising results
“To date, 76 stores have already transitioned to their new owners and we expect that all conversions will have taken place by the end of the year. From the stores already transitioned, we are seeing promising results, with customer frequency and basket size trending upwards.” Market share is back to preannouncement levels. The better performance in Belgium will play an important role in the recovery of European margins in the coming years, the company said.
Ahold Delhaize’s online sales suffered from the sale of New York e-commerce player FreshDirect, but rose hard at its other divisions, both at Food Lion and Hannaford in the US and at Albert Heijn. The Dutch market leader did experience a negative revenue impact of 1.9 percentage points due to the cessation of tobacco sales.
