May 7, 2020 / 6:15 AM / in 20 days

Ahold profits surge as consumers stockpile on food, shift online

AMSTERDAM (Reuters) - Ahold Delhaize (AD.AS), one of the world’s largest food retailers, said first-quarter core earnings rose by more than a third as consumers stockpiled during the coronavirus outbreak and stepped up online shopping, notably in the United States.

FILE PHOTO: A logo of Albert Heijn is seen at the entrance of the shop operated by Ahold Delhaize, the Dutch-Belgian supermarket operator, in Eindhoven, Netherlands, January 23, 2019. REUTERS/Eva Plevier

Ahold lifted its outlook for online sales in its key U.S. market on Thursday after they surged 47% in the first quarter, a shift Chief Executive Frans Muller expects to become a lasting trend.

“We see an acceleration of our online sales, we also see changing customer behaviour,” he told Reuters in a phone interview. “For the full year in the U.S. we see 50% growth (online).”

The United States - where Ahold operates the Hannaford, Giant and Stop & Shop chains and the Peapod grocery delivery business - accounts for around two-thirds of the Dutch group’s total worldwide sales.

Ahold said its total underlying operating income rose to 961 million euros ($1.04 billion) in the first quarter, topping the 878 million expected by analysts polled by the company.

The company said it will maintain its dividend forecast and share buyback plans, extend sick pay in the United States and increase wages globally for supermarket and distribution centre employees.

Its shares rose more than 2% in early trading in Amsterdam, putting them up nearly 1% since the start of this year.

The group maintained its overall 2020 outlook for profit margins broadly in line with 2019 and mid-single-digit growth in earnings per share. It also kept its forecast for free cash flow of more than 1.5 billion euros this year, which it announced last month.

Muller said the company had maintained its group outlook despite the better-than-expected first quarter because it expects a cost overhang in the remaining quarters following increased spending on its distribution networks and economic uncertainty due to the pandemic.

“We are very happy with our online development, definitely impacted by COVID-19, but we also believe that online sales will further accelerate,” he said. “We are very comfortable with our 2021 target of online sales of 7 billion euros.”

Group sales rose 14.7% in January-March to 18.2 billion euros, Ahold said in a statement, as customers in Europe and the United States increased spending on groceries.

Net online sales, including at its Peapod business and Bol.com non-food store in Europe, rose nearly 39% to 1.3 billion euros, it said.

Online sales increased more than 47% in the United States to 324 million euros in the quarter, and by 36% in Europe to more than 1 billion euros.

The company said it is accelerating investment, particularly in its online services, to meet higher demand. It also said it was increasing spending on safety measures.

Reporting by Anthony Deutsch; editing by Jason Neely and Susan Fenton

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