Supermarket group Ahold Delhaize beat its first-quarter profit margins and confirmed its guidance on Wednesday, helped by European performance.
The group also showed confidence in recovering volumes later this year amid slowing inflation.
Group shares were up 3.4% on Wednesday morning.
Inflation And Volumes
Supermarket firms who have increased prices to deal with inflationary measures are struggling to maintain margins as food inflation slows.
The additional issues of wages jumping and shoppers curbing their spending as well as opting for more private label products have compounded problems in maintaining margins.
Ahold Delhaize reporter higher-than-expected underlying operating income margin of 4% for the January to March period.
This is above the 3.8% increase expected by analysts.
The group saw margin improvement in Europe during the first quarter, with a 0.3 percentage point rise to 3.2%.
Margins declined 0.2 percentage points to 4.6% in the US, partly affected by cuts in benefits to low-income families that had helped them buy groceries.
Ahold Delhaize makes more than half its revenue in the US.
Positive Developments
In Europe, the group’s finalised agreement to franchise all of its 128 own-operated stores will play a significant role in European margin recovery, according to the company.
It added that it is optimistic in price negotiations as inflation slows after soaring the past two years.
Retailers had claimed producers’ hikes were unjustified, shown by Carrefour’s refusal to stock PepsiCo products amid price increases.
According to the chief executive of Ahold Delhaize, Frans Muller, conversations about price are still intense between manufacturers and retailers as both groups now aim to increase volumes.
Muller said, “We come out of a period where we saw negative volumes or negative units.
“And that is not healthy for manufacturers and not for us (…) manufacturers support this now more with more promotions or lower prices.”
He added that the group expects positive developments in volumes both in Europe and the US by the end of the year.
“What we see is inflation coming down and volumes going up, those are the two trends,” he said.
The group’s sales reached €21.72 billion in the quarter, slightly above forecasts of €21.53 billion.
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