© Reuters. FILE PHOTO: The Ahold Delhaize logo is seen at the company’s headquarters in Zaandam, Netherlands August 23, 20src8. Picture taken August 23, 20src8. REUTERS/Eva Plevier/File Photo
By Federica Mileo and Diana Mandia
(Reuters) -Supermarket group Ahold Delhaize on Wednesday trimmed 2023 earnings guidance and flagged margin weakness in the United States, its main market, sending its shares falling over 7%.
Retailers, whose profits have been boosted over the past two years by rising prices, are seeing their margins squeezed as food price inflation falls and consumers curb their spending.
The group, which operates the Stop & Shop, Giant, Food Lion and Hannaford chains in the U.S. and the Albert Heijn and Delhaize chains in the Netherlands and Belgium, now sees 2023 underlying earnings per share slightly below last year’s level, It had previously forecast annual profit in line with 2022.
Margins in the U.S. grew less than expected in the third quarter, Ahold said in a statement, but added it expected this pressure to be transitory and pass in a couple of quarters.
“The reduction in emergency federal Supplemental Nutrition Assistance Program (SNAP) benefits, higher interest rates and the resumption of student loan repayments in October continue to weigh on customer sentiment,” CEO Frans Muller said about the U.S. market.
All this, coupled with stubbornly high inflation, created further anxiety for many customers, Muller added.
“What we see in trends is that wallets of customers, household budgets are more constrained,” he said, pointing to clients buying more of the group’s cheaper private label goods.
For the upcoming holiday season, the group is leaning on private label products and hopes to entice customers with its offers to convert loyalty points into free seasonal products, such as pumpkin pie, as well as promotions on Thanksgiving turkeys.
The group reported underlying operating income of 839 million euros for the third quarter, below 856 million euros in a company-compiled consensus.
($src = 0.9367 euros)