Morningstar

Ahold Delhaize Earnings: Mixed Q1 Performance and Uncertainty Around Belgium Strikes

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Securities In This Article
Koninklijke Ahold Delhaize NV
(AD)

Ahold Delhaize AD released first-quarter results with sales up 9.4% to EUR 21.6 billion (up 6.3% at constant exchange rates). Sales were slightly ahead of company-compiled consensus (EUR 21.5 billion) with underlying operating income of EUR 822 million broadly in line (EUR 828 million for company-compiled consensus ). Comparable sales growth was 6.2% and 6.1% for the U.S. and Europe, respectively, versus 5.5% and 5.6% estimates for company-compiled consensus. In the U.S., the main driver of outperformance was the continued strong performance of remodeled stores and the resilient performance of loyalty programs and online channels. In Europe, excluding the impact of strikes in Belgium following the announcement by the company of its intention to transform its integrated supermarkets into independently managed Delhaize stores, comparable sales were up 7.7% (a 200-basis-point impact). On profitability, the underlying operating margin for the group was 4% (a 20-basis-point decline), with strong U.S. margins (at 4.8% or 40 basis points higher due to better availability from improving supply chains) offsetting margin declines in Europe (due to energy costs and strikes) and a reduction in Global Support Office insurance gains. Excluding escalating energy costs and Belgium strikes, underlying margins were modestly ahead of prior-year levels (3.5% in the first quarter of 2022).

For 2023, the group reiterated guidance for earnings per share to be at 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 are achievable and are in line with our estimates. The company also expects to payout in dividends around 40%-50% of earnings and has previously disclosed a EUR 1 billion share buyback program. We expect to maintain our EUR 30.5 fair value estimate for the firm. Shares are fairly valued.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar*. He covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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