Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong second quarter performance with solid momentum in both regions.
- Omnichannel capabilities and own brand assortment showing positive results.
- European margin recovery is well underway.
- Continued growth in online sales, particularly in Europe.
- Successful cost control measures and vendor support contributing to improved margins.
Negative Points
- Impact of closing 32 underperforming Stop & Shop stores, leading to significant non-recurring pretax charges.
- Negative impact on net sales from the divestment of Fresh Direct and the end of tobacco sales in the Netherlands.
- Higher labor costs and service costs in the U.S. impacting margins.
- Ongoing cost inflation requiring continuous mitigating actions.
- Seasonal patterns affecting free cash flow, with a significant decrease compared to the previous year.
Q & A Highlights
Q: Why hold EPS guidance flat when H1 grew 4%? Would you expect a decline in the second half?
A: Our current solid position gives us the opportunity to start investing in our growing together strategy in the next few quarters. We are confident that we can deliver on our guidance and will use any momentum to drive profitable growth going forward. (Jolanda Poots-Bijl, CFO)
Q: Are you able to give any context on the margin impact of the Stop & Shop closures?
A: We remain our guidance for 2024, including the Stop & Shop impact underlying. We expect to recognize a non-recurring pretax charge of $160 million to $210 million in Q3 2024. (Jolanda Poots-Bijl, CFO)
Q: Do you have any comments or details about U.S. Consumer Health and whether the consumer is getting better or worse?
A: We are in the food business, which is less discretionary. We have strong digital propositions, loyalty programs, and private label shares above 30%. We are confident in our ability to serve customers with affordable, sustainable, and healthy products. (Frans Muller, CEO)
Q: Could you go through the drivers of the U.S. margin performance this quarter?
A: The majority of support in the margin is based on solid cost control, vendor allowances nearing pre-COVID levels, and stabilization of shrink. These factors drive a solid margin, providing an excellent foundation for future investments. (Jolanda Poots-Bijl, CFO)
Q: Why did you allow the margin to expand year-on-year in Q2 instead of increasing price investments?
A: We are investing more in brands like Stop & Shop and Giant Food to drive volumes and competitiveness. We are happy with the initial results of our price investments and will continue to monitor and adjust as needed. (Frans Muller, CEO)
Q: Can you explain the one-off costs for the Belgium future plan and any additional costs expected in the second half?
A: We have one quarter to go on the unusual costs for the Belgium future plan, which will be included in Q3 results. After that, we will operate the stores as affiliated stores, ending the below-the-line costs. (Jolanda Poots-Bijl, CFO)
Q: Can you help us understand the seasonality of working capital movements and any extra vendor support?
A: Working capital follows a regular seasonal pattern. We are increasing franchise sales, which has a positive impact on inventories and a negative impact on receivables. There is nothing unusual in our working capital trends. (Jolanda Poots-Bijl, CFO)
Q: What is the payback time for the charges related to Stop & Shop and other restructuring efforts?
A: The payback period for these charges is very short, within one to two years, making us cash-positive on these decisions. (Jolanda Poots-Bijl, CFO)
Q: Do you intend to convert underperforming stores in Stop & Shop to other banners within the group?
A: No, we do not plan to convert underperforming Stop & Shop stores to other banners. The closures are specific to Stop & Shop, and there will be no planned conversions to other brands. (Frans Muller, CEO)
Q: Can you elaborate on the volume growth in the U.S. and Europe?
A: In the U.S., we are still slightly negative on volume overall, but some brands are showing positive volumes. In Europe, we have overall positive volumes, with most brands also showing positive trends. (Frans Muller, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
