Strong Close to Year for Ahold Delhaize
The grocery store chain released fourth-quarter results that included sales up 15.9%, surprising on the upside.
Ahold Delhaize AD released fourth-quarter results that included sales up 15.9% to EUR 23.4 billion (up 8.1% at constant exchange rates), surprising on the upside. More specifically, sales were ahead of the company-compiled consensus (EUR 23.4 billion versus EUR 23.29 billion) with underlying operating income of EUR 1,026 million ahead of the EUR 890 million company-compiled consensus, primarily driven by higher-than-expected cost savings (EUR 100 million over expectations). Comparable sales growth was 9.3% and 5.7% for the U.S. and Europe, respectively, versus 8.1% and 5.9% estimates for company-compiled consensus. In the U.S., the main driver of outperformance was the strong performance of remodeled stores at Stop & Shop and the resilient performance of loyalty programs and online channel. In Europe, bol.com and the challenging e-commerce market in Benelux weighed on top-line growth (Europe up 6.9% excluding bol.com).
For 2023, the group now expects earnings per share to be in 2022 levels (implying underlying growth due to nonrecurrence of one-off gains in 2022 related to interest rates), with underlying operating margin over 4% and free cash flow around EUR 2 billion, which we think is conservative. The company also expects to payout in dividends around 40%-50% of earnings and have previously disclosed a EUR 1 billion share buyback program. We don’t expect to materially change our fair value estimate for the firm. Shares appear slightly overvalued.
At bol.com, net consumer online sales were down 1.9% in the full year (versus 6% decline for the market according to the company), implying market share gains, while the online retailer remained profitable (despite deleverage) achieving EUR 125 million in underlying EBITDA. The grocer’s Save for Our Customers cost-savings program is expected to produce savings of more than EUR 1 billion in 2023 (versus EUR 979 million in 2022), which the company aims to reinvest in the business through lower prices and better offering.
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