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ZAANDAM, the Netherlands — Ahold Delhaize reported that its global net sales rose by nearly 13% to 19.6 billion euros ($23.7 billion) in the fourth quarter, fueled by strong online and comparable store sales gains.
“We are pleased with the underlying Q4 performance in both the U.S. and Europe,” Ahold Delhaize president and CEO Frans Muller said. “Our leading local omnichannel platform generated nearly 130% net consumer online sales growth in the U.S. and nearly 75% growth in Europe in the quarter, at constant exchange rates. This strong Q4 performance allowed us to exceed our underlying EPS outlook and produce €2.2 billion in free cash flow in 2020, despite significant payments to withdraw or improve the security of pension plans in the U.S. and the Netherlands, and our accelerated investments in digital and omnichannel capabilities.”
Demand related to COVID-19 was a major factor in the sales gains, and also in the increased costs that hurt margins.
Group underlying operating margin in Q4 was 4.1%, down 0.3 percentage points from the prior year at constant exchange rates. Underlying operating margin was impacted by significant costs related to COVID-19, which amounted to approximately €210 million in Q4, a planned pension expense increase in the Netherlands, transition expenses related to the U.S. supply chain transformation initiative, and other one-time items in the U.S. These impacts were partly offset by a margin benefit of 0.2 percentage points from the calendar effect of a 14-week quarter, compared to 13-week quarter in 2019. Group IFRS-reported operating margin was 0.1% in Q4, impacted by the U.S. multi-employer pension plan withdrawal and settlement agreements.
Ahold Delhaize reported a net loss of €9 million in the quarter, due mainly to the previously announced U.S. pension plan withdrawal and settlement agreements totaling 841 million euros.
The company, which operates the GIANT Co., Giant Food, Food Lion, Hannaford and Stop & Shop chains in the U.S., said the COVID-19 pandemic continues to create uncertainty for 2021. But the company expects continued online sales gains, including net consumer online sales growth of over 30% in 2021 (including growth of more than 60% growth in U.S.)
Improving online productivity across all of its brands is one of Ahold Delhaize’s priorities for 2021 and beyond, the company said. Plans call for the opening of a new micro-fulfillment center with Autostore/Swisslog inside of a new omnichannel fulfillment center in Philadelphia in the fourth quarter of 2021, which is one of the steps the company is taking in the U.S. and in Europe to reduce its last-mile costs.
“Last quarter, we outlined plans to invest in our business to solidify our position as an industry-leading local omnichannel retailer in 2021 and beyond in order to increase our share of the consumer wallet, and find ways to improve our online productivity,” Muller said. “Since then, we continued to bring to life, and build upon, several important initiatives, including significantly increasing our online capacity, driven in part by opening over 1,130 U.S. click-and-collect locations to date; launching the GIANT Company Choice Pass on January 19th, which offers unlimited free grocery delivery and pickup with an annual membership fee of $98; and rolling out the no-fee home delivery service AH Compact to additional markets in the Netherlands. We are also exceeding the key multi-year financial targets we outlined at our 2018 Capital Markets Day. As a result, we feel increasingly confident about our prospects in 2021 and beyond, and are now setting more ambitious targets in several key areas of our business.”
