Supermarket operator Ahold Delhaize reported second-quarter results that exceeded market expectations, as a mix of cost-saving measures and share gains helped counteract pressure from rising energy and transport expenses and a cautious consumer backdrop.
Management said higher energy and transport costs have become an increasing concern for retailers after disruptions to shipping routes and higher oil prices linked to the conflict in the Middle East. That environment, combined with uncertain household finances, is leading more shoppers to seek bargains.
"Customers are looking for value, customers are looking for pricing and promo," CEO Frans Muller said, underscoring the company’s focus on meeting demand for lower prices and promotional deals.
The group, known for brands such as Albert Heijn and Delhaize in the Netherlands and Belgium as well as U.S. chains including Stop & Shop, Food Lion and Giant, reported underlying operating income of 906 million at constant exchange rates for the quarter. That figure translates to an operating margin of 3.9%.
Analysts polled by the company had expected underlying earnings above 885 million and a margin of 3.8%. Muller described the reported margin as "a thin, shallow margin," but added that it remained favorable relative to others in the industry.
To manage a volatile cost environment, the company said it is engaging in supplier negotiations more frequently than the traditional once-a-year cadence. These intensified talks aim to control inputs and mitigate the impact of fluctuating costs on margins.
Jefferies analysts commented that the results showed Ahold’s resilience in the U.S. market, which accounts for roughly 60% of the company’s sales. The company’s shares were marginally higher in Amsterdam after Ahold reiterated its guidance for the full year.
U.S. market dynamics present mixed signals. While U.S. consumer sentiment improved in July after hitting an all-time low in April, shoppers remain preoccupied with purchasing power and pocketbook issues. Muller said he expects consumer sentiment to remain challenging at levels similar to recent months, signaling limited near-term relief in consumer spending patterns.
To appeal to cost-conscious American shoppers, Ahold has previously announced a planned 1 billion investment to lower prices in its U.S. stores, an initiative scheduled to run through 2028.
On the sales front, U.S. revenue growth of 1.4% was held back by a reduction in government SNAP benefits and changes to pharmacy pricing, with the combined effect of those factors reducing growth by 1.6 percentage points.
Currency conversion used in reporting was noted as ($1 = 0.8669 euros).
Overall, Ahold Delhaize’s quarter combined modest margin strength and targeted investments with active cost management and a vigilant stance on supplier negotiations, aiming to balance competitive pricing for consumers against headwinds from higher energy and transport costs.