August 8, 2018 / 6:26 AM / a year ago

UPDATE 1-Ahold reports Q2 sales, earnings almost in line with expectations

(Updates with details, quotes)

By Toby Sterling

AMSTERDAM, Aug 8 (Reuters) - Ahold Delhaize, the Dutch operator of grocery chains in the United States and Europe, on Wednesday reported quarterly sales and earnings almost in line with analysts’ expectations.

Sales declined 3.7 percent from a year earlier to 15.5 billion euros ($18.0 billion) in the second quarter, while net profit rose to 410 million euros from 355 million euros as underlying margins improved fractionally in the United States.

Analysts polled for Reuters had expected sales of 15.5 billion euros and profit of 414 million euros.

The company said the numbers were impacted by the inclusion of Easter holiday in the second quarter of 2017, and sales would have risen 2.4 percent if adjusted for currency and other changes.

Analysts had expected sales growth of at least 1 percent-2 percent in the United States, where Ahold does two-thirds of its business on the East Coast and in southern states under the Stop & Shop, Giant, Hannaford and Food Lion brands.

“In the United States, comparable sales growth excluding gasoline was -0.1 percent, or 1.0 percent adjusted for the timing of Easter,” CEO Frans Muller said while presenting his first quarterly report.

Muller, a former Delhaize executive, took the top job from Dick Boer, who retired in April.

“Volumes at Hannaford and Food Lion remained positive but were challenged at other U.S. brands. We expect the implementation of our brand-centric organization to result in an improvement in sales trends in the third quarter,” Muller said.

Muller joined Ahold in 2016 after the $28 billion merger of Ahold’s and Delhaize’s U.S. properties, overseeing the integration.

With much of the synergies between the two companies already achieved, analysts are now watching to see whether Ahold, dominant in the Netherlands, can keep up with tougher competition in the United States.

Shares have gradually recovered from a shock in the summer of 2017 when Amazon announced its acquisition of Whole Foods. Ahold shares have gained 14 percent so far this year.

But on Tuesday, shares dropped 3.4 percent to 20.99 euros after Berenberg analysts initiated coverage with a “sell” recommendation, saying the company needed to invest 1.6 billion euros in its U.S. operations quickly to keep pace.

U.S. rivals include not only Amazon, Walmart and traditional supermarket competitors such as Safeway and Kroger — sometimes rumoured as possible merger partners — but also German discounters Aldi and Lidl who are pushing into its markets.

Ahold kept its forecast of 1.9 billion euros in free cash flow for 2018.

$1 = 0.8604 euros Reporting by Toby Sterling; Editing by Subhranshu Sahu

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