Morningstar

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.

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Securities In This Article
Koninklijke Ahold Delhaize NV
(AD)

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.

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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