Ahold's like-for-like turnover growth collapses

Net quarterly profit 2014 slightly better than in 2013

Ahold’s net profit in 2014’s first quarter was considerably lower than in 2013, with 50 million euro compared to 1.95 billion euro in the same quarter last year.

Back then, it managed to add the income from ICA’s sale, which was a one-off operation. Net profit, excluding this sale, still reached 203 million euro. However, the 50 million euro from 2014’s first quarter also suffered a one-off charge as Ahold has just recently settled a fraud court case dating back to 2003.

The settlement will cost Ahold 215 million euro, adjusted for taxes. If this charge is ignored, Ahold even managed a slightly better operating profit in the past quarter than it did in the same quarter last year.

Like-for-like turnover growth online: 20 %

A lot of these results reflect the past, while the turnover growth and particularly the like-for-like turnover speaks volumes about the future. Unfortunately for Ahold, the future does not seem too bright at the moment.

Its online future however does seem bright, as Ahold management has expressed its satisfaction on the 20 % like-for-like online turnover growth, to 362 million euro in 2014’s first quarter. Downside is that the online market is currently costing the company more than it is bringing in. Therefore, these are the seeds that Ahold hopes to harvest in the future.

In the short term, Ahold has to focus on its core activity: physical stores. Nevertheless, the customer seems more intrigued by its competitors like Jumbo and Lidl, especially when comparing to Albert Heijn’s performance in the Netherlands. On the other hand, one could say that customers still visit the supermarkets, but spend considerably less per visit.

Dutch market share stabilizes

Ahold’s like-for-like turnover in the Netherlands dropped 1.4 % in the first quarter, “mainly because the Albert Heijn customer places fewer items in his shopping cart”, according to a press release. That resulted in a stabilized market share for the market leader, despite the overall 1.2 % turnover growth thanks to new AH stores in Belgium and former C1000 stores which have now become new Albert Heijn franchise stores.

The company’s largest market, the United States, also failed to get a like-for-like turnover growth. It managed a meager 0.1 % turnover growth (excluding gas sales) and that will not have pleased Ahold USA’s management, especially as 2013’s first quarter led to a 1.9 % turnover increase – quite a difference compared to now.

The downturn in turnover growth has prompted Ahold to speed up implementation of its program to offer the customer better quality and service. It aims to bring more fresh foods, more involved staff and specific price drops to the customer. Ahold will get the funds for these changes through its cost-saving program and particularly its ‘simplicity’ approach. In total, Ahold USA expects to save up to 250 million dollars (183 million euro) in cost-saving measures this year.

Like-for-like turnover drop bigger in the Netherlands

Albert Heijn will pull out all the stops in the Netherlands to turn the tide, especially as the 1.4 % like-for-like turnover drop is quite a big difference compared to the 1.8 % turnover growth in 2013’s first quarter.

That means that the drop in like-for-like turnover is even bigger in the Netherlands than in the United States. “The goal is to focus more on Albert Heijn and to improve the commercial performance. […] We have added new products in our coffee and wine branches and we have expanded our healthy food branch”, Ahold states.

The upcoming quarters will demonstrate whether these moves will suffice, but it is evident that the recovery of the like-for-like turnover (growth) is a primordial concern for Ahold’s management.