Ahold does well in second quarter

AH: more transactions and more volume

The sizeable increase in net profit is partly because last year Ahold had to deal with a one-time 12 million euro charge in relation to the US Foodservice settlement it had reached. Nevertheless, a considerable part of the profit growth was because of excellent results, because quarterly profit still grew 22.6 % if the one-time charge is ignored.

Dutch like-for-like turnover grew 3.4 %, which is way up from the 1.7 % drop it had to deal with last year. CEO Dick Boer referred to an increase in transactions and larger volumes at local chain Albert Heijn. “This increased our market share compared to one year ago”, Boer said in a reaction to the quarterly results. According to Ahold, Albert Heijn’s excellent results come on the back of strong commercial programs and product range improvements that customers have taken a liking to.

Total net turnover also increased to nearly 2.9 billion euro (+ 6.8 %): the addition of 21 former C1000 stores in the Netherlands and 8 new Albert Heijn stores in Belgium have definitely contributed to that result. Online turnover also grew: Albert Heijn’s and bol.com’s online activities grew more than 30 %. “And we will continue to invest in future growth”, Boer said.

Online investments put margins under pressure

The urge to invest online has had its influence on the underlying operational margin: the additional investments into Ahold’s omnichannel strategy has pushed the margins down nearly 25 points over the first 6 months of 2015. However, as these are investments in a growth market, this drop cannot be called alarming and is even along the lines of expectations, the quarterly results statement point out.

Online is the difference with the reports on the first quarter: the online investments played a more emphatic role back then, but that is not the case for the second quarter. The excellent Albert Heijn performance, whose supermarkets experienced strong turnover growth, had a positive effect on the operational margin.

United States: better stores and lower costs

Like-for-like second quarter turnover (excluding fuel) in the United States grew 1.8 % while it dropped the exact same amount in the second quarter of last year. This growth and an improvement program for its American stores helped grow net turnover 2.1 % (at level exchange rates). As the American dollar increased in value compared to the euro, net turnover grew an astonishing 22.5 % to nearly 5.4 billion euro.

Ahold USA added new fruit and vegetables sections to 92 supermarkets in the second quarter and that has had a positive effect on turnover. Ahold USA now has 167 supermarkets with a new fruit and vegetable section. Not only did it improve a number of stores, the company also invested into new stores as it declared its intention to acquire 25 A&P stores in the New York region.

Over the second quarter, Ahold managed to improve its operational margin by 0.2 % in the United States. Its “simplicity” program, intended to get costs under control through constant efficiency checks and cost-saving measures, has helped the company do so. “For the fourth consecutive quarter, we grew volume market share in the United States”, Boer said. “Our margins were resilient, as a result of ongoing cost control.”

Czech Republic: Albert transformation successful

In Ahold’s third region, the Czech Republic, the company managed to attract an increasing number of customers: the like-for-like turnover (excluding fuel) grew 2.1 %. By comparison, 2014’s second quarter represented a 2.9 % turnover drop. Ahold believes this is because of the launch of its new and improved store formula, Albert. It will now speed up its introduction, which should be finalized by the end of the third quarter.

Czech net turnover grew nearly 31 % to 400 million as it added 49 Spar stores it acquired a year ago. Ahold already reported past May that it had turned these stores (14 supermarkets and 35 compact hypermarkets) into its new Albert store formula. The transformation costs did weigh down the second quarter’s profitability, lowering Ahold’s Czech operational margin with 1 point to 1 %.