November 7, 2018 / 6:38 AM / 9 months ago

Ahold Delhaize to lift target for online sales after strong performance

AMSTERDAM (Reuters) - Ahold Delhaize (AD.AS), the Dutch-Belgian operator of grocery stores in Europe and the United States, expects to increase its target for online sales after they surged in the third quarter, its top executive said on Wednesday.

Ahold Delhaize headquarters is seen in Zaandam, Netherlands August 23, 2018. REUTERS/Eva Plevier

The supermarket operator, which generates roughly two-thirds of its revenue in the United States, is investing in new online fulfillment warehouses which it hopes will lower costs and improve delivery times.

A partnership with startup Takeoff will see the opening of a first small automated warehouse center at a Stop & Shop store in Connecticut this year, said Ahold Delhaize Chief Executive Officer Frans Muller.

Its push into robotic distribution will help the grocer take on the likes of Kroger (KR.N), Amazon (AMZN.O) and Albertsons ABS.N.

Ahold Delhaize’s online sales surged 21.5 percent to 677 million euros ($776 million) in the third quarter compared with a 3.6 percent rise in group sales to 15.8 billion euros ($18.09 billion). Analysts polled by the company had forecast 2.5 percent higher group sales of 15.5 billion euros on average.

Shares in the retailer were up 6.5 percent at 21.69 euros at 1025 GMT.

Ahold Delhaize has a 2020 online sales target of 5 billion euros ($5.7 billion), but on the current pace of growth will reach that early.

Muller said that “as ambitious as we are, you can imagine we will come with a new target next Tuesday” at a capital markets day.

Sales rose 3.2 percent to 11.2 billion euros in the United States, where Ahold Delhaize also owns Food Lion, Giant Food and Hannaford. It is the market leader there in online grocery delivery with its Peapod subsidiary.

“With the 12 percent (online sales growth) in the U.S. that’s a step up from the second quarter, but our ambition is higher. So, we are happy with the trend, we are not happy with the absolute sales increase number for (U.S. subsidiary) Peapod,” Muller told Reuters.

Underlying quarterly operating income beat expectations, rising to 647 million euros, compared with an average analyst forecast of 620 million euros.

The supermarket company said its free cash flow rose 112 million euros to 538 million euros, and it increased its full-year guidance to 2 billion euros from 1.9 billion euros.

The owner of Stop & Shop and Giant chains on the U.S. East coast confirmed its target of net synergies of 420 million euros in 2018 and 750 million euros of gross synergies in 2019.

($1 = 0.8722 euros)

Reporting by Anthony Deutsch, Editing by Sherry Jacob-Phillips and Elaine Hardcastle

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