Ahold's third quarter results were excellent, with mainly the 4 % like-for-like turnover growth in the Netherlands as a remarkable stand-out figure. Albert Heijn's performance had much to do with that success.
Good in the United States, better in the Netherlands
"We are on track to deliver a full year performance in line with expectations and to complete the proposed merger with Delhaize by mid-2016", CEO Dick Boer optimistically said in a press release. He definitely has his reasons to be so upbeat: exchange rate fluctuations stimulated Ahold's turnover growth, although it would still have managed a 1.7 % growth without those fluctuations. Excluding gas sales (where prices were under pressure), the company achieved a 3.3 % turnover growth at level exchange rates.
Ahold's largest market, the United States, like-for-like turnover growth reached 1.8 %, excluding gas sales and at level exchange rates. This particular market contributes 62 % of the company's net quarterly turnover. Ahold USA's online supermarket, Peapod, managed double-digit growth because its newest online fulfillment center in New Jersey (launched earlier this year) was handled more efficiently.
Ahold's best performance however came from the Netherlands, which is worth 33 % of the company's third quarter turnover. Its third quarter net turnover grew 7.4 % compared to 2014's third quarter. Ahold explains the impressive 4 % like-for-like turnover growth by pointing out Albert Heijn handled more transactions and sold higher volumes in this past quarter, particularly when it comes to fresh products.
Not only did the like-for-like turnover grow, the total turnover also grew because of the transformation of the former C1000 stores and the additional of several stores in Belgium, where it currently has 33 Albert Heijn stores.
Online potential in Belgium
Albert Heijn also took full advantage of the attention it received when it rolled out its online supply chain. Both AH.nl and Bol.com had a third quarter turnover increase of more than 30 %. Main growth for Ahold's online non-food subsidiary, Bol.com, came from its Plaza platform, where third parties can sell items on bol.com, and from its growth in Belgium. Once the merger with Delhaize is completed, Ahold Delhaize could use Delhaize stores to launch pick-up points and reach a lot of additional online customers.
Czech net turnover, at level exchange rates, grew 6.4 %, mainly because of the 49 former Spar stores it acquired in August 2014 and which have now become part of its local Albert formula. These relatively large stores are not performing all that well count towards the third quarter's identical turnover performance. The Czech Republic represents 4.7 % of Ahold's quarterly turnover.
Local like-for-like turnover (excluding gas sales) dropped 0.7 %, but Ahold says it is now trialing several new initiatives to boost turnover and efficiency in these Albert stores. More private labels and more Czech products (because of the nationalistic sentiment) will have to turn the tide for Ahold in this part of Europe.
Q4: the quarter of truth
The bride to be, Delhaize, already presented decent numbers last month and its partner, Ahold, now also displayed excellent numbers. Albert Heijn, and therefore Ahold for the most part, is in good shape at the eve of the ever-important fourth quarter. Even though its competitor Lidl is running trials with more fresh products and additional services, its market share seems to have hit a ceiling. The holiday season turnover will show whether that is actually the case.
Once that period has passed, both Ahold and Delhaize will present their separate numbers one more time prior to the planned merger in the summer of 2016. From that point onward, the merger company can focus on integrating the nearly 100 % complementary operations of both Ahold and Delhaize. The Dutch company managed to cut costs once more in the United States and the Netherlands thanks to its Simplicity program and that particular program will gain a new impetus after the merger. As CEO Dick Boer said: "This combination will create a stronger international food retailer for the benefit of our customers, associates and shareholders."