Ahold Delhaize bets on AI and digital to boost earnings and savings

2:07 pm Thursday, May 23rd, 2024

By Federica Mileo and Diana Mandia

(Reuters) -Supermarket group Ahold Delhaize expects to grow underlying earnings and boost savings over the 2025-2028 period, it said on Thursday, helped by higher automation of its back-end operations and driving more customers to its digital apps.

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, is targeting compound annual growth in underlying earnings per share at a high single-digit rate from 2024.

Supermarket firms are struggling to maintain margins as food price inflation eases. Ahold Delhaize reported an underlying operating margin of 4.1% in 2023 with a forecast of 4% or higher for this financial year and a target to maintain an average 4% until 2028.

“We are a 4% margin company,” Chief Financial Officer Jolanda Poots-Bijl said in a statement.

The group, which held strategy days on Wednesday and Thursday, said it expects 5 billion euros ($5.41 billion) in cumulative savings by applying AI and automation in its logistics, distribution, store operations and back office, while steering loyalty scheme customers towards its apps.

“We intend to funnel loyalty customers from physical cards to our digital apps, which should yield a rapid increase in monthly active users where we target 30 million by 2028,” the group said in its statement.

It said its omnichannel approach, which integrates physical shops, apps and websites, results in shoppers spending between 1.5 and 3 times more in the group’s most mature markets.

The supermarket group also wants to increase sales of its own-brand products to 45% of total shop sales during the period, as squeezed shoppers turn to private labels to reduce their spending.

“While our own brands have served a critical role in our growth path so far, I can assure you the story won’t end here post inflation,” President and CEO Frans Muller said while presenting the strategy.

The group also expect its additional income streams, including consumer data services and ad sales on its supermarkets’ websites, to be around 3 billion euros by 2028.

($1 = 0.9249 euros)

(Reporting by Federica Mileo and Diana Mandia; Editing by Tomasz Janowski, Kirsten Donovan and Jan Harvey)