Ahold CEO Dick Boer cited competitive pressures in New England as a contributing factor in the company’s flat U.S. sales in the first quarter, but it’s not stopping the company from targeting online expansion.
Ahold's U.S. operations posted first-quarter net sales of $8 billion, down 0.3%. Excluding fuel sales, overall sales were flat relative to the same period last year. Identical sales growth excluding gas was 0.1%, which included the positive impact this year of the post-Easter week falling into the second quarter.
Peapod achieved double-digit sales growth and opened 47 new pickup points, bringing the total to 167, Ahold reported.
"The market was characterized by a continued focus on value and volumes remained under pressure," said Boer. "Our market share was down slightly, mainly driven by competitive pressures in New England," he said. "We are expanding our online position in the United States and the Netherlands, and we are pleased with the overall sales growth of more than 20% on an identical basis."
Throughout the course of the quarter Ahold rolled out a program focused on improving the company's customer proposition across all divisions.
"The program was piloted in the second half of 2013, resulting in encouraging volume uplifts," Boer noted. "To bring better quality, service and value to our customers, the program focuses on improving our fresh offering, enhancing customer experience through more engaged store associates and introducing targeted price reductions. By the end of the first quarter, the program was active in 190 stores and we are accelerating our plans for further rollout, increasing the intensity of the program in New England specifically," he said. "By the end of 2014, we expect the program to be implemented in over 50% of our store base, largely funded by the expected $250 million simplicity cost savings in the United States this year."
Ahold reported underlying operating margin of 3.9%, 0.2% lower than last year, mainly impacted by cost price inflation outpacing retail pricing. Private label penetration increased 50 basis points to 37.0%, approaching the company's target of 40% by 2016.