Koninklijke Ahold Delhaize Q1 2025: Strong Sales Growth Fuels Strategic Momentum

Koninklijke Ahold Delhaize delivered a robust Q1 2025 performance, with net sales surging 5.0% year-on-year at constant exchange rates to €23.3 billion. The results underscore the company’s ability to navigate macroeconomic headwinds through strategic acquisitions, omnichannel expansion, and targeted price investments. Here’s a deep dive into the numbers and their implications for investors.

Sales Growth: Profi Drives Momentum, Online Surges

The acquisition of Profi, completed in late 2024, contributed 2.9 percentage points to sales growth, while online sales rose 13.7% at constant rates. This growth was bolstered by strong performances in both core regions:
- U.S. Sales: €13.9 billion (+1.8% at constant rates), driven by online growth (17.9%) and pharmacy sales. Key brands like Food Lion and Hannaford continued their streak of positive sales growth, with Food Lion achieving 50 consecutive quarters of gains.
- Europe: €9.3 billion (+10.1% at constant rates), fueled by Profi’s 1,700 stores and comparable sales growth of 3.7%, excluding a 1.1% drag from tobacco sales cessation in the Netherlands and Belgium.

The company’s omnichannel strategy shone, with bol (its Dutch e-commerce platform) and Albert Heijn’s algorithm-optimized delivery routes driving European online sales up 10.1%. In the U.S., partnerships with DoorDash and expanded click-and-collect options supported resilience during winter storms.

Profitability: Margin Pressures Offset by Strategic Leverage

While net sales grew strongly, the underlying operating margin dipped to 3.8% (a 0.2 percentage-point decline at constant rates). This reflected U.S. price investments, such as Giant Food’s “Fresh Low Prices” initiative and Stop & Shop’s 40% store price rollouts, which diluted margins. However, European profitability improved, with Benelux markets contributing 0.3 percentage points to the region’s 3.4% margin.

- U.S. Sales Growth: +1.8% (vs. +0.7% in Q1 2024)
- European Sales Growth: +10.1% (vs. +3.2% in Q1 2024)

Despite margin pressures, diluted underlying EPS rose 4.6% to €0.62, reflecting cost discipline and operational agility.

Strategic Priorities and Risks

The company’s “Growing Together” strategy is anchored in three pillars:
1. Price Competitiveness: U.S. brands slashed prices on staples, while Albert Heijn’s AH Terra line (now 350 products) offered 10% discounts via its premium loyalty program.
2. Omnichannel Dominance: Online sales are on track to break even by 2026, with bol’s growth and smart logistics investments reducing delivery costs.
3. Sustainability Leadership: Ahold Delhaize achieved a CDP climate rating upgrade to A- and aims for 50% plant-based food sales in Europe by 2030.

However, risks linger:
- Geopolitical Volatility: Central and Southeastern Europe face protests and inflationary pressures, weighing on margins.
- Currency Risks: A stronger euro could impact EPS if the USD/EUR rate remains below guidance assumptions.
- Regulatory Headwinds: Tobacco sales cessation in Belgium (effective April 2025) will further dampen European sales growth.

Outlook and Investment Takeaways

Ahold Delhaize reaffirmed its 2025 guidance:
- Underlying Operating Margin: ~4.0%
- Underlying EPS Growth: Mid- to high-single digits (assuming €1.10 USD/EUR)
- Free Cash Flow: At least €2.2 billion

The stock rose 3.44% pre-market to $36.64 on May 7, reflecting investor confidence in its execution. With a 3.2% dividend yield and 19 consecutive years of dividend payments, the company balances growth and shareholder returns.

Conclusion: A Hold for Growth, a Buy for Resilience

Ahold Delhaize’s Q1 results highlight its dual strengths: leveraging scale to drive sales and executing strategic initiatives to offset margin pressures. The Profi acquisition and online momentum position it well for mid-term growth, while its price-led strategies and sustainability milestones align with shifting consumer preferences.

However, investors should monitor geopolitical risks and currency fluctuations. For a defensive play in retail, Ahold Delhaize’s diversified portfolio and cash flow stability make it a compelling hold, with upside potential if the company exceeds its margin targets.

Final Take: Ahold Delhaize’s Q1 performance validates its “Growing Together” strategy. While risks persist, the stock’s 18.6% year-to-date return and strong fundamentals suggest it’s a reliable pick in a volatile sector.