Ahold Delhaize USA finished the first quarter of its fiscal 2020 with very strong growth, fueled by sales from COVID-19 panic and stock-up shopping.
Q1 2020 net sales increased 13.7% to USD12.5 billion versus USD11.0 billion during the same period 2019. Same-store sales excluding gas increased 13.8%; all banners saw double-digit growth. Comps were positively impacted by massive growth in March mostly attributable to COVID-19, and slightly negatively impacted by less severe winter weather. Specifically, comp sales growth excluding gasoline grew 1.7% in January and February, and 33.8% in March.
Online and Re-imagine Stop & Shop
Online sales continued to generate large growth, up 42.3% in constant currency for the quarter. By the end of Q1, Ahold Delhaize USA reached a total of 707 click-and-collect locations (up from 692 at the end of 2019.) The grocer has raised its previous goal of 1,000 sites for the year to over 1,000. In line with its 3-year plan to shift the US supply chain to a self-distribution model, Ahold Delhaize acquired three warehouses from C&S Wholesale Grocers. The faster the retailer can make the warehouses productive spaces, the more impactful the acquisitions will be in helping Ahold Delhaize reach its omnichannel goals and the better chance it has to make headway toward its 3-year target.
Previously, the retailer aimed to remodel an additional 65 Stop & Shop stores in 2020 following successful performance of stores that have already been remodeled. Due to COVID-19, Ahold Delhaize expects fewer than 65 remodels, and to extend timelines. While completing remodels quickly would be ideal, making sure the remodels perform according to or better than expectations, makes taking the time necessary to complete remodels worthwhile.
Like many retailers, Ahold Delhaize has invested a great deal in its response to COVID-19. Stores have implemented heightened safety measures and precautions for shoppers and associates to help promote health and well-being. While the grocer has experienced immense growth from heightened shopper demand related to COVID-19, it also expects some financial challenges from its investments to arise in the future. While sales for April were above baseline, they have waned a bit from March levels. For more about Ahold Delhaize’s investments in combating the pandemic, take a look at the big 3 grocers’ response and the rest of Kantar’s COVID-19 insights on the COVID-19 page.
Ahold Delhaize maintains the full-year outlook it shared on April 7 despite uncertainty surrounding the pandemic. Investments made in relation to COVID-19 became material at the end of Q1 and will continue to become more visible in the coming quarters; free cash flow generated during Q1 was strong and growth is unsustainable in the long-term.
The retailer plans to increase speed of investments in digital and omnichannel capabilities. Quick investments and expansion of omnichannel fulfillment will likely help the grocer reach its year-long goal of 30% growth and over 1,000 click-and-collect sites. Growth also continues to support customers wanting to shop online during the sustained stay-at-home period and beyond.
Ahold Delhaize USA should do what it can to maintain or pass its timelines for its online fulfillment expansion, remodels with Re-imagine Stop & Shop, and other initiatives. The retailer began the year with solid performance, and the better the retailer can stay on track through COVID-19, the stronger chance it has at emerging ahead and carrying strong growth through coming quarters.
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Ellie Pinto, Analyst