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Ahold Delhaize Looks To Click-And-Collect Endless Aisle For Digital Growth

Ahold Delhaize Looks To Click-And-Collect, Endless Aisle For Digital Growth

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https://www.pymnts.com/earnings/2021/ahold-delhaize-looks-to-click-and-collect-endless-aisle-for-digital-growth/
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The online grocery space may have exploded in the past 14 months, but the market remains underpenetrated, leaving grocers with plenty to be excited about when it comes to digital growth. For its part, Dutch grocery company Ahold Delhaize reported Wednesday (May 12) that in the first quarter of 2021, net consumer online sales accelerated to 103 percent, with 188 percent growth in the United States and 79 percent growth in Europe. Looking ahead, the company expects online sales to continue to grow, raising its guidance to predict over 70 percent growth in U.S. online sales in 2021 and to predict over 40 percent net consumer online sales growth overall.

A significant share of the U.S. digital sales growth came from the company’s acquisition of New York-based online grocer FreshDirect, which closed in January, and without which Ahold Delhaize’s U.S. online sales would have grown 135 percent for the quarter, rather than 188 percent.

“They have very high fulfillment performance levels — on-time, complete orders, a super high level of freshness in the proposition. 60 percent of the total sales are fresh. I think it’s a great addition to us that we can learn from,” CEO Frans Muller said of FreshDirect on a call with analysts. “And on the other hand, of course we would like to make sure that we also share groupwide learnings with them as well, when we talk about things like marketing and digital, eCommerce, and these types of areas.”

Another driver of the company’s strong U.S. online sales growth came from the expansion of click-and-collect locations, growing to 1,139 collection points at the end of Q1, up from 1,116 the previous quarter, per a presentation shared with analysts. Additionally, the company plans to expand to nearly U.S. 1,400 click and collect points by the end of 2021. Muller emphasized that the company’s click-and-collect services were provided in-house, rather than through third-party picking services such as Instacart.

“We operate our own click-and-collect services, we operate our own fulfillment, it’s our own data, it’s our own front end, it’s our own relationship with customers,” said Muller. “That’s why we invested two years ago, in our PRISM software, which is … proprietary software to support the total fulfillment became but also the front-end process, the total eCommerce suite for the U.S. business.”

Also in the U.S., Muller said that the company would launch its Ship2Me endless aisle in the latter half of the year, which would offer over 100,000 grocery and general merchandise products. Investing in eCommerce growth outside of the U.S., the company plans to open its first home delivery fulfillment center in the Czech Republic in 2022, to expand its Albert Hejin “AH Compact” grocery delivery service to additional markets in the Netherlands.

Overall, net sales were €18.3 billion, up 0.3 percent from Q1 2020, marking growth more modest than it may have otherwise been were it not for the €150 million spent on COVID-19-related costs.

Chief Financial Officer Natalie Knight explained on the call that the previous year’s Q1 sales only included COVID costs for the final two weeks of the quarter, whereas in 2021 these costs “went over the whole period as opposed to just that short time,” she said, adding, “Our expectations for COVID cost going forward this year are that you’re going to see that level off very quickly … We believe we’re going to see significantly lower costs as we go forward.”

Diluted earnings per share totaled €0.54, down from €0.59 the previous year. Relative to pre-pandemic sales, however, the company “expect[s] underlying EPS to grow in the low- to mid-teen range versus 2019.”

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May 12, 2021 at 04:53PM
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