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Stop & Shop Owner Ahold Delhaize’s Cost Controls Lift Profit

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A Stop & Shop grocery store is displayed in the Brooklyn borough of New York, US, on Saturday, July 13, 2024. Stop & Shop said Friday it will close 32 underperforming grocery stores in the Northeast US by the end of the year. Photographer: Yuki Iwamura/Bloomberg (Yuki Iwamura/Bloomberg)

(Bloomberg) -- Royal Ahold Delhaize NV reported profit in the second quarter that was better than expected, aided by the grocer’s cost-savings programs.

The retail group, which owns chains including Food Lion and Hannaford in the US and Albert Heijn in the Netherlands, said its adjusted operating profit rose to €933 million ($1 billion) in the period. That was above an average estimate of €871.5 million in a Bloomberg survey of analysts. 

Ahold Delhaize shares rose as much as 5.5% in Amsterdam, the biggest intraday jump in more than five months. 

“The major driver in Europe is the Belgium transformation,” Ahold Delhaize’s Chief Financial Officer Jolanda Poots-Bijl said in an interview. “That really is paying off and somewhat faster than we expected,” she said.

The Zaandam, Netherlands-based company has entered into agreements to franchise 128 stores in Belgium. It has also worked to simplify processes at the group and has moved toward a less asset-intensive online delivery model such as click-and-collect in the US, its largest market. 

Ahold Delhaize last year agreed to divest the FreshDirect business and in July, pledged to close 32 underperforming stores under its Stop & Shop brand. The retailer anticipates the closings will have a net impact of $550 million to $575 million on 2025 sales. The company will also take a pre-tax charge of between $160 million and $210 million in the third quarter, it said in a statement on Wednesday. 

“Inflation has moderated, if you compare it to last year,” Poots-Bijl said. “But we still see that our customers are under pressure. They really are seeking value,” she said. 

The company has targeted cumulative cost savings of €5 billion between 2025 and 2028 through joint sourcing and using automation in logistics and distribution. 

©2024 Bloomberg L.P.