Ahold Delhaize Shares Rise After Strong Q2 Earnings Beat, Maintains FY24 Guidance

Shares of Ahold Delhaize experienced a notable increase following the release of the company’s second quarter results, which exceeded expectations for both its US and European segments.

As of 6:57 am (1057 GMT), Ahold Delhaize’s stock was up 3.3%, trading at €30.23.

According to UBS Global Research, the company reported Group Net Sales of €22.3 billion, surpassing the consensus estimate of €22.13 billion. The Group’s Underlying Operating Income also exceeded forecasts, coming in at €933 million compared to the consensus of €868 million and UBS’s estimate of €878 million. The Group’s operating margin was reported at 4.2%, outperforming both the consensus estimate of 3.9% and UBS’s 4.0%.

Jefferies analysts noted that recent weeks saw the stock acting as a safe haven amidst volatile markets, leading to a gradual increase in positioning.

In the US, comparable sales saw a slight decline of -0.4%, against a consensus of -0.5%, with net sales of €13.57 billion, marginally above the expected €13.56 billion. The underlying operating margin improved by 8 basis points to 4.7%, surpassing the consensus of 4.4%. The reported EBIT for the US segment was €632 million, exceeding both the consensus of €601 million and UBS’s estimate of €608 million, attributed to vendor allowances and effective cost management.

In Europe, comparable sales increased by 2.4%, outperforming the expected 1.7% and close to UBS’s estimate of 2.5%. Net sales from this region amounted to €8.77 billion, which beat the consensus of €8.56 billion and UBS’s estimate of €8.54 billion. The European underlying operating margin stood at 3.7%, higher than the consensus of 3.4% and UBS’s 3.5% estimate, with underlying operating income reaching €324 million—approximately 11% above consensus—driven by strong performance in Belgium and reduced energy costs.

However, the Group’s Free Cash Flow (FCF) was reported at €378 million, a 22% decrease year-over-year, primarily due to a cash flow disparity from a one-time tax refund in the prior year and a negative working capital change of €212 million caused by timing issues.

Cost management has been a focal point, with Group Segmental EBIT at €956 million, 7% ahead of the consensus estimate of €893 million.

Ahold Delhaize has maintained its guidance for FY24, expecting an underlying operating margin of at least 4.0%, consistent with consensus expectations. The company is targeting at least €1 billion in cost savings and projects FCF to reach around €2.3 billion, slightly above the consensus of €2.22 billion, with capital expenditures expected to be approximately €2.2 billion. Earnings per share (EPS) is anticipated to remain stable compared to 2023, with consensus predicting a minimal growth of -0.7%.

The company also addressed the impact of the 32 Stop & Shop closures, forecasting a net sales effect of $100-$125 million in FY24 and $550-$750 million in FY25. Additionally, a non-recurring pre-tax charge of $160-$210 million is anticipated in Q3’24, though the cash implications are still uncertain. The acquisition of Profi is expected to be finalized in the fourth quarter.