Ahold Delhaize

Ahold Delhaize

13 June 2018Reading time: 3 minutes

The first quarter went well for Ahold Delhaize, both the revenue as well as the net profit increased. However, the Dutch/Belgium supermarket chain cannot sit still. Especially within the United States, the company experiences more pressure from competitors such as Walmart and Kroger.

The first quarter results of Ahold Delhaize showed a revenue increase on an annual basis of 2.5% to EUR 14.9 billion. The net profit increased with 25% to EUR 407 million. Especially the online segment of Ahold Delhaize performed well. The revenue from online sales grew with 23.2%. In the Netherlands the revenue increased with 3.2% and even in Belgium, where the company struggled for a long time, the revenue grew with 4.1%. At the same time the profit margin in the Netherlands plummeted with 10 points due to the investments in the online division. The free cash flow ended at EUR 441 million.

Despite these strong results, Ahold Delhaize was plagued by negative exchange rate effects, which pulled down their financial results. When taking the negative exchange rate effects into account, there only remains a 14.5% net profit increase and a revenue decline of 5.9%.

Also within the US Ahold Delhaize achieved a revenue increase of 2.1%, when negative exchange rate effects are ignored. By now the American market determines 61% of the total revenue of the supermarket chain.

At the same time competitor Kroger recently announced that it will start a collaboration with the British Ocado, in order to strengthen their online segment. At this moment Kroger is one of the largest retail players of the US. Besides that the American market leader Walmart keeps on growing. Also recently it became known that the British supermarket chain Asda, which is owned by Walmart, will merge with the British Sainsbury. If this merger finally goes through, this combination would knock the current British market leader Tesco off the throne. Walmart would own 42% of this new combination. Both Kroger and Walmart already claimed that they want to invest more in the upcoming years to strengthen their online market positions within the US. Meanwhile Ahold Delhaize also has to fend of competitors such as Amazon. Although Ahold Delhaize still expects a free cash flow of EUR 1.9 billion for this year, it remains to be seen if the necessary investments in the US could influence this.

The stock price of Ahold Delhaize stands at EUR 23.21 (06.06.2018). Although the stock price decreased slightly since the last peak at the end of April (24.04.2018) at EUR 24.35, the price of the share is still almost 10% higher compared to a year ago. On June 20th of 2017, the stock price fell after Amazon announced the acquisition of Whole Foods. It remains to be seen if Ahold Delhaize can convince investors during the coming period of their strength in the US and if they indeed will invest more in this market.

The future price of the share is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

Vontobel products on Ahold Delhaize are tradable at DEGIRO.

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21/09/2019 03:01:56