Ahold Delhaize remains 100% convinced of the move to a franchise model at Delhaize. CEO Frans Muller also believes that the worst of the opposition is over, now that all stores are open again.
Belgium is “not very flexible”
The transformation project at Delhaize, where the 128 supermarkets still under company control would be sold to franchisers, has the full support of the management of Ahold Delhaize. The multinational wants to improve the efficiency of the entire group, and Delhaize’s plans are part of that. “Today, 636 shops are already franchised,” said the CEO, and a complete shift to franchising remains the only way forward.
More specifically, it is the “only option for renewed growth in the long term”. “The Belgian market has been in trouble for years” because the country is “not very flexible”, there are already a lot of shops and price competition is fierce. That’s what CEO Frans Muller said on a conference call with investors following the quarterly results.
“Largely behind us”
The executive admits that the negotiations are “not easy”, but again insists that employees will keep their wages and working conditions even after the takeover. A further meeting with the unions is scheduled for 23 May, but management already believes the worst is over.
“We are happy to see that all supermarkets are open again. Sales are also returning to normal levels. We believe that the impact of the strikes is largely behind us and that the financial impact of the transition will also moderate over the course of the year,” added CFO Natalie Knight.
Lower sales and margins due to strikes
The costs of the reorganisation are in any case “limited”. In the first quarter, Ahold Delhaize recorded a restructuring cost of 15 million euros, but this was not just for Delhaize. The strikes did, however, weigh on sales and operating margins. The supermarket group recorded comparable sales growth of 6.1% in Europe; without the strikes, growth would have been 7.7%. The margin also fell by almost one percentage point.
After the franchising, which is still to take place this year, Delhaize will mainly be able to increase margins. This should bring them closer to the group average. In addition, sales will fall briefly as a result of the transition, but the group expects them to rise more rapidly thereafter.