Corona crisis causes Ahold Delhaize to achieve unprecedented sales growth - does that make the stock attractive to investors?

Corona crisis causes Ahold Delhaize to achieve unprecedented sales growth - does that make the stock attractive to investors?

08 June 2020Reading time: 4 minutes

From marketing campaign to reality. The one-liner ‘Hamsteren!!!’ (Hoarding), has got a whole new meaning for Ahold Delhaize due to the corona crisis. Both online and offline sales as well as profit numbers of the food retailer from Zaandam, grew significantly in the first quarter. The total revenue increased on an annual basis with 15% to EUR 18,2 billion and the operational profit even rose with 40% tot EUR 964 million in the same period. 

Lockdown boosts revenue of supermarkets and online sales

Especially in the first week after the outbreak of the COVID-19 virus in the Netherlands, store shells in supermarkets of Albert Heijn were cleared out. This caused for extra challenges within the distribution process and for the grocery delivery service AH to-go.

By now the situation has returned to normal and all physical stores of Albert Heijn are attuned to the new 1,5 meter guidelines. Because people have to work from home due to the lockdown and can’t go out eating, it seems that the Albert Heijn stores are taking benefit from longer grocery lists. This resulted in a first quarter revenue of EUR 5,8 billion from physical stores in Europe.

The demand for groceries through online sales channels has also increased. Sales platform Bol.com benefited from a higher demand for products such as puzzles, books and other home entertainment items. This resulted in an online first quarter revenue of more than EUR 1 billion in Europe, which is an increase of 36,3% on an annual basis.

Ahold Delhaize is gaining ground in the US

In the past period the same development was noticeable in the United States. Due to the corona virus, Americans started ‘prepping’ en masse, which boosted the revenue of Ahold Delhaize also in this market. The total first quarter revenue in the US grew on an annual basis with 13,7% to EUR 11,3 billion. With this result the US market now takes up 62% of the companies’ total revenue. 

Also the online sales of Ahold Delhaize in the US increased, which resulted in an online revenue of EUR 324 million, 42,3% higher compared to the same period in 2019. However, in the US the online market is dominated by heavy competition for Ahold Delhaize by companies such as Amazon.com. Despite this fact, the Dutch food retailer has already announced to invest more in its global online sales channels in the coming period.

What is the message for the future?

Although Ahold Delhaize doesn’t seem to suffer from the corona crisis at this moment, just like other companies the retailer is uncertain about their results in the nearby future. According to the European medicine agency, a vaccine will not be available until next year at the earliest.

CEO Frans Muller stated that the safety and health of their customers and employees is now the number one priority of the company. The higher costs for extra staff and adjustments in the stores, will probably show up in the following quarters this year. Ahold Delhaize also expects that the underlying margin for this year will be mainly in line with 2019, while the cash flow will pass the number of EUR 1,5 billion.

Economists and analysts worldwide fear that the worst economic impact is yet to come. On May 15, the CBS (Central Bureau for Statistics)  presented new figures about the Dutch economy. With a decline of 1,7% in the first quarter, the damage seems to be not too bad. Some of the larger Dutch banks had counted on an decline of 2%. For the Belgium economy however, BNP Paribas presented a more depressing expectation in which the Belgium economy will decline this year with 11,1%.

Is Ahold Delhaize a good investment?

For now it seems that the share Ahold Delhaize is a relatively safe investment. Unlike many other listed companies, the retailer maintains its dividend pay-out and share repurchase program. Due to the stock market crash early March, partly caused by the oil crisis, the share lost 18% of its value. By now the stock price is already at the same level as in December last year.

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

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Vontobel products on Ahold Delhaize are tradable at DEGIRO.






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26/09/2021 02:20:16