EUR 850.00 For Business Accounts Only

Morningstar | Ahold Delhaize Reports In-Line 4Q Sales; U.S. Momentum Continues; Shares Slightly Rich

Ahold Delhaize reported fourth-quarter results, with fiscal 2018 sales at current exchange rates down 0.2%, in line with our expectations of down 0.4%. Management reaffirmed fiscal 2018 guidance and indicated that it expects EPS for the year to be at the high end of previous guidance (EUR 1.50 to EUR 1.60). Given this mostly in-line print, we are maintaining our EUR 19.50 fair value estimate and no-moat rating. Shares look slightly overvalued.

We were pleased to see continuous improvement in the United States, the largest segment of the group (61% of sales). With price inflation lower than the previously reported 1.6% and a slightly favorable weather impact, the 2.7% like-for-like (excluding gas) sales growth reported in the fourth quarter implies around 1% volume growth for the division (most of it in-store), reflecting a noticeable improvement from past trends in regions with fierce competitive markets (Southeast) and stagnant market growth (Northeast). U.S. online sales were up 12.1% at constant exchange rates.

In the Netherlands, like-for-like sales growth was 3.3% for the quarter, with bol.com up 32.3%. The grocer said that both stores and online at Albert Heijn grew volumes during the quarter. In Belgium, Ahold Delhaize saw appreciable improvement after implementing its transformational plan in a tough market environment with like-for-like sales growth up 3% for the quarter versus down 3.1% for Carrefour Belgium in the same period.

Although rarely does a quarter make a trend, we will be closely monitoring the group's in-store sales growth in the coming quarters, especially in the U.S., for signs of a sustainable reversal of trends.