Food Lion-owner Ahold Delhaize beats profit view on cost cuts, market gains
Second-Quarter Performance and Market Dynamics
By Dimitri Rhodes
Aug 5 (Reuters) - Supermarket group Ahold Delhaize reported second-quarter earnings above market expectations on Wednesday, as cost cuts and market-share gains helped offset pressure from higher energy costs and cautious sentiment.
Rising Costs and Consumer Behavior
Rising energy and transport costs have become a growing concern for retailers following disruption to shipping routes and higher oil prices linked to the conflict in the Middle East, while the uncertain economic backdrop directs shoppers to look for deals.
CEO Insights on Customer Preferences
"Customers are looking for value, customers are looking for pricing and promo," CEO Frans Muller told Reuters.
Financial Results Overview
The Dutch group, which runs the Albert Heijn and Delhaize chains in the Netherlands and Belgium, said its underlying operating income fell 0.3% at constant exchange rates to €906 million ($1.05 billion), corresponding to a margin of 3.9%.
Analysts polled by Ahold were expecting earnings above €885 million and a margin of 3.8%.
Industry Comparison
"That is a thin, shallow margin," Muller said, but added it was still good compared to the rest of the industry.
Supply Chain Negotiations
The company, which also runs U.S. chains like Stop & Shop, Food Lion and Giant, is having more frequent supply chain negotiations with its vendors than the traditional once-a-year talks to manage the volatile cost situation, he said.
Market Response and Analyst Commentary
Jefferies analysts said in a note that the results demonstrated Ahold's resilience in the "tumultuous" U.S. market, which makes up 60% of its sales.
The company's shares were marginally higher in Amsterdam, after it also repeated its guidance for the full year.
U.S. Market Under Pressure
Consumer Sentiment Trends
U.S. consumer sentiment perked up in July, having touched an all-time low in April, as consumers remain focused on pocketbook issues like purchasing power.
"I think consumer sentiment stays challenging at the same identical levels as we saw before," Muller said.
Investment in U.S. Market
Ahold had previously announced a $1 billion investment plan to lower prices at its U.S. stores to appeal to value-conscious consumers, running through to 2028.
Impact of Policy Changes on Sales
U.S. sales growth of 1.4% was slowed by a reduction in government SNAP benefits and pharmacy pricing changes, with a combined negative impact of 1.6 percentage points, it said.
($1 = 0.8669 euros)
(Reporting by Dimitri Rhodes in Gdansk; Editing by Matt Scuffham and Milla Nissi-Prussak)
