Ahold Delhaize trims profit target amid US margin weakness By Reuters

© Reuters. FILE PHOTO: The Ahold Delhaize emblem is seen on the firm’s headquarters in Zaandam, Netherlands August 23, 2018. Image taken August 23, 2018. REUTERS/Eva Plevier/File Photograph

By Federica Mileo and Diana Mandia

(Reuters) – Grocery store group Ahold Delhaize on Wednesday trimmed 2023 earnings steering and flagged margin weak point in america, its predominant market, sending its shares falling almost 6%.

Retailers, whose income have been boosted over the previous two years by rising costs, are seeing their margins squeezed as meals worth inflation falls and shoppers curb their spending.

The group, which operates the Cease & Store, Large, Meals Lion and Hannaford chains within the U.S. and the Albert Heijn and Delhaize chains within the Netherlands and Belgium, now sees 2023 underlying earnings per share barely under final yr’s stage, It had beforehand forecast annual revenue consistent with 2022.

Margins within the U.S. grew lower than anticipated within the third quarter, Ahold stated in an announcement, however added it anticipated this stress to be transitory and go in a few quarters.

“The discount in emergency federal Supplemental Diet Help Program (SNAP) advantages, increased rates of interest and the resumption of pupil mortgage repayments in October proceed to weigh on buyer sentiment,” CEO Frans Muller stated in regards to the U.S. market.

Stubbornly excessive inflation, rates of interest and adjustments in U.S. authorities assist had been creating additional nervousness for a lot of clients, he added.

Ahold’s underlying working margin within the U.S. was 4.2% within the third quarter, under consensus expectations of 4.4%, in response to KBC analyst Michiel Declercq.

“Margins within the US had been softer than anticipated, even if many of the headwinds had been already properly flagged in the course of the pre-earnings name,” Declercq stated in a observe to buyers.

Ahold raised its 2023 money circulate goal for the second time this yr, citing vital enhancements in working capital administration. It now sees free money circulate of two.2-2.4 billion euros ($2.35-2.56 billion) this yr.

The group additionally stated it could launch a 1 billion euro share buyback programme firstly of 2024.

($1 = 0.9367 euros)