Ladies and gentlemen, good morning, and welcome to the analyst conference call on the second quarter and half year 2023 results of Ahold Delhaize. Please note that this call is being webcast and recorded. Please note that in today's call, forward-looking statements may be made, or statements other than statements of historical facts may be forward-looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in the statements. Such risks and uncertainty are discussed in the interim report, second quarter and half year 2023, and also in Ahold Delhaize's public filings and other disclosures.
Ahold Delhaize's disclosures are available on aholddelhaize.com. Forward-looking statements reflect the current views of Ahold Delhaize's management and assumptions based on information currently available to Ahold Delhaize's management. Forward-looking statements speak only as of the date they are made, and Ahold Delhaize does not assume any obligation to update such statements, except as required by law. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of Ahold Delhaize. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, JP.
Thank you, operator, good morning, everyone. I'm delighted to welcome you today to our Q2 2023 results conference call. On today's call is Frans Muller, our President and CEO. After a brief presentation, we will open the call for questions. In case you haven't seen it, the earnings release and the accompanying presentation slides can be accessed through the investor section of our award-winning website, aholddelhaize.com, which also provides extra disclosures and details for your convenience. To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to two questions. If you have further questions, feel free to reenter the queue. To ensure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated. With that, over to you, Frans.
Thank you very much, JP, good morning, everyone. On today's call, I will cover both our business performance and the key financials. Following our EGM in July, we look forward to welcoming Jolanda Poots-Bijl as our new CFO on October 1st. Next week, Jolanda will begin her extensive and immersive onboarding to our company. In the short interim, the finance leadership team will ensure a smooth and successful transition to her. Today, for a change, I will start with the key financial highlights and follow up with my usual commentary on the main business drivers, and finally, touch on the outlook for the remainder of the year. One of the key ambitions of our Leading Together plan is to grow faster than our historical average, and I'm very pleased we once again did so in the second quarter.
Net sales grew 4.3% to EUR 22.1 billion, supported by group comparable sales growth of 4.6%. Net consumer online sales grew 9.3%, driven by strong growth at bol.com, and further increase in online grocery penetration. Group underlying operating margin was 4.1%, in line with the prior year. A slight decline in our U.S. and European margin was offset by insurance benefits at our global support office. Diluted underlying earnings per share was EUR 0.62, up 4.7% at actual rates. The solid operating performance was partly offset by negative U.S. dollar exchange rate effects. Our 2023 interim dividend is EUR 0.49, up 7% from EUR 0.46 in 2022, as a straightforward mathematical calculation in line with the group's interim dividend payout policy.
In the first half, we bought back 18.9 million shares for a consideration of around EUR 560 million, also in line with our EUR 1 billion annual plan. On the balance sheet, on the balance sheet compared to the prior year, net debt decreased from EUR 15.3 billion to EUR 14.7 billion. Finally, of note, Q2 free cash flow was a healthy EUR 864 million, which represents an increase of EUR 269 million compared to the second quarter 2022. The main driver of the year-over-year increase was related to the collection of the income tax receivable following agreement with the Belgian tax authorities, which we outlined last quarter.
When starting 2023, we see a clear agenda for our company, ensuring the right balance between navigating the complexities of the immediate environment, while at the same time positioning the company for long-term growth and success. Reflecting on these, I'm proud of where we are, and also very proud of where we are heading. In our formula for success, I see three things that have been critical to this. First of all, being agile and adaptable to meet and exceed customer needs. Secondly, embracing transformation in our operating model. Lastly, continuing to advance our sustainability agenda. As for being agile and adaptable, the speed and flexibility that our brands and associates are showing, adjusting in real time to meet customers' needs, underpins the strong culture of care of our company and what our company delivers to our communities.
I would like to thank all of our associates for their dedication and always going the extra mile to support their communities, particularly in times of need. Through our brands loyalty programs, the scale and leverage provided by our global portfolio and award-winning own brand proposition, and our EUR 1 billion Save for Our Customers program, by those, we continue to help customers navigate these dynamic times. From a top-line perspective, slide 9 captures some of this dynamic, where you see the last four quarter trends in comparable sales growth by region. In Q2, U.S. comparable sales, excluding gasoline, increased by 3.6%, or 4%, excluding the impact of weather and calendar effects. In Europe, comparable sales increased by 6.3%. Excluding the impact of strikes in Belgium, this would have been 7.6%.
In the U.S., powered by growth in loyalty sales and increasing online penetration, we more than compensated for the negative headwinds related to a reduction in SNAP and moderating inflation rates. A hallmark of our company is our great local brands with deep roots in their communities. The GIANT Company is a great example here. This year, The GIANT Company is celebrating 100- years anniversary. With 193 stores and 186 pickup points, they serve more than 3 million customers in the states of Maryland, Pennsylvania, New Jersey, Virginia, and West Virginia. Already in 1979, The GIANT Company introduced bonus buys and everyday low prices, paving the way for GIANT Choice Rewards, award-winning loyalty programs. Today, GIANT has 95% of sales coming from its loyalty programs and has the highest e-commerce conversion rates in the U.S.
Food Lion continued its impressive performance of 43 consecutive quarters of comp store, store sales growth, and the performance of the first batch of the planned 70 remodeled stores in the Wilmington Greenville markets in North Carolina is going according to plan. Construction has already started on the next batch of stores in the Raleigh and Charlotte markets. At Stop & Shop, 17 of the 22 New York City stores have been remodeled. These stores are showing better results than anticipated, both in sales and in household traffic. In Europe, a great example of agility is how we have leveraged our long history and leading position in our own brands. For our total European assortment, we moved fast and now have 6,500 EDLP or price favorite SKUs on our shelves, which is up 15% compared to last year.
Our Eastern European brands also continue to benefit from the CSE transformation program, the Central and Southeastern European transformation program, in which we are aligning business models, centralizing our sourcing activities, harmonizing own brand, and working on other scale drivers. In terms of brand performance, with a double-digit online penetration rate, and after crossing 800,000 paid Albert Heijn premium subscribers, Albert Heijn's omni-channel strategy goes from strength to strength. While food inflation remains high in the Netherlands, 11.5%, the last print for July, Albert Heijn continues to invest in the brand's most popular fruits and vegetables to ensure healthy and sustainable products, which then are available and affordable for all our customer wallets. Albert Heijn also continues to pioneer new industry innovation, recently launching its own AI startup called Gen AI Labs.
One of their first applications is the recipe scanner. This tool is available via the Albert Heijn app and allows customers to take a photo of a random recipe, which is then automatically converted into a shopping list with Albert Heijn products. Bol.com also stands out for its agility and adaptability, as gross merchandise value, GMV, increased by 10.5% year-over-year to EUR 1.4 billion. This is a big turnaround in less than 12 months, since the team overhauled its midterm strategy, again, highlighting the tremendous value of the Bol.com company. Bol.com's GMV sales from its nearly 52,000 third-party sellers increased 13% and represented overall 66% of sales. In addition, we see strong partner take-up of our value-added services, with advertising services up over 70% and logistics offerings up over 25% compared to last year.
If we move below sales, underlying operating margin was flat with the prior year at 4.1%. In the U.S., underlying operating margin was 4.6%. The reduction in the SNAP federal assistance program, moderating inflation rates, as well as the dilutive effect of our increased pharmacy sales, were only partly offset by lower logistical expenses, driven by our continued supply chain improvements. Underlying operating margin in Europe was 3.2%. In Q2. Down 0.2 percentage points from the prior year, mainly due to strikes in Belgium and the impact of higher energy costs. Together, these factors impacted European margins by about 70 basis points.
These impacts were partly offset by non-cash service charge for the Dutch employee pension plan, which decreased EUR 15 million as a result of higher discount rates in the Netherlands. Slide 16 shows you our results on an IFRS reported base for the second quarter. Our IFRS reported operating profit and earnings were mainly impacted by charges related to the Belgium transformation and the Accelerate initiative, including impairment charges for store assets in Belgium of EUR 108 million, and for the Jersey City fulfillment center of EUR 40 million, as well as restructuring and related costs of EUR 40 million. As I said in my opening, embracing and driving transformational change in our operating model to set our company up for long-term success, is one of the critical agendas we are driving this year.
Given our big transformation ambitions in new business models, in technology, in automation, and in data, we committed to higher investments in tech capabilities to fuel growth, reinforce our long-standing Save for Our Customers program, and securing our industry-leading margins. While some of these actions, like those initiated by Delhaize Belgium, take a lot of courage and are disruptive in the short term, I'm confident these measures will ensure the long-term success of our brands for the benefit of all our stakeholders. Let me give you a quick update on the most important initiatives. Let's start with Belgium and the future plan, which the local management team communicated in March. As stated then, by having all 128 owned stores operated by local entrepreneurs, Delhaize will have a better opportunity to respond to changing market conditions and evolving customer needs.
As announced earlier this week, Delhaize has signed agreements for the first 15 integrated stores, which will be affiliated in October and November. Five of these acquirers already operate other Delhaize markets. Five entrepreneurs joined the Delhaize family for the first time, and five acquirers are associates of Delhaize. In total, we have 400 potential acquirers for the 128 stores. Announcements about additional stores making the transition will be made at regular intervals over the coming months. The present development shows the confidence in our brand of Delhaize, also the care we have to transfer our employees to the new acquirers with the same type of conditions on the labor front. Looking at the U.S., our connected customer strategy and omni-channel transformation continues to deliver exceptional results. Here are a few facts just from Q2.
Online traffic was up 13%, primarily from app traffic, which was up 24%. Our focus on personalized offers is paying off, with 7% more offers being redeemed per household, compared to the same time last year. To sustain the right trajectory as part of our Accelerate initiative, the U.S. teams have taken a close look at the entire omni-channel operations, with a view to achieve fully allocated e-commerce profitability by 2025, as we said before. One such concrete action is to orient our online fulfillment capabilities towards more efficient, less asset-intense, same-day delivery models, such as click and collect. In line with this, we decided to close the fulfillment management facility in Jersey City, which coincides with the lease expiring next year.
Instead, we will utilize our existing Stop & Shop store network and partners to service customers with more same-day delivery and pickup options, providing a more enhanced service and leveraging our existing asset base to better effect. Finally, let me spend a few moments on the third critical factor contributing to our success, our commitment to sustainability. We remain dedicated to making progress on our sustainability ambitions and are proud to share that we have achieved a triple-A rating from MSCI. Being categorized into the highest rating indicates that Ahold Delhaize is a leader in the industry in managing its most significant sustainability challenges and opportunities. This would not have been possible without all the initiatives that our brands are continuously implementing in their organizations. Selection of these examples is shown on the slide.
From an holistic perspective, Hannaford is a great example of where our growth and sustainability ambitions reinforce each other. Their impressive performance of 27 quarters of market share gain during the last 29 quarters is a testament to this. The backbone of Hannaford's success is their ongoing investment in their fresh and convenient strategy, which continues to resonate with customers and is clear, a clear driver of these great results. Hannaford is deeply committed to the important role they play in the local communities by continuously investing in hunger relief, healthy eating, sustainability, and diversity, equity, and inclusion initiatives. This is also in line with Hannaford's purpose to be greater than groceries, and can be highlighted by some great examples.
More than half of Hannaford's own brand sales, which are the highest of all AD U.S.A at a 35% share, comes from items rated as healthy within our Guiding Stars nutritional nutritional rating program. Hannaford achieved zero food waste going to landfills in 2021, making them the first large-scale grocer in New England and New York to reach this achievement. In 2022, these efforts resulted in donating nearly 26 million pounds of food to our anti-hunger partner organizations throughout the northeastern states. There is more to come. In 2024, Hannaford stores electricity consumption will come 100% from renewable sources. Another major sustainability achievement in the quarter was bol.com's attainment of a B Corp C ertification, and with 13 million customers and 52,000 local sales partners, we are proud that an e-commerce platform of bol.com size has achieved this recognition.
Finally, I'm a big believer that through creativity and innovation, we can create more transparency and positive emphasis at the customer level. An Albert Heijn pilot currently being conducted in a Gen AI lab is VegaSwap. With this application, you automatically get a vegetarian version of a recipe in the AH magazine. Soon you will be able to opt for an alternative that reduces, at the same time, CO2 emissions. Wrapping up for today, with our strong culture, known for its agility, with our ability to drive transformative change, and with our commitment to sustainability, I'm very confident we are all well prepared to navigate the complexities of the current business environment. In terms of what to expect in the coming quarters, here are a few things worth noting.
On a positive note, we see more evidence that inflation has passed its peak, inflation still remains at more elevated levels due to higher energy, commodity, transport, and labor costs. These factors will continue to impact second half of profitability, particularly labor, as we implement changes related to our new CLA agreements. While inflation coming down is clearly a good thing for the customer, the consumer environment is still fragile, extending from the pandemic. This is clear in the U.S., for example, where we see the impacts of the reduction in the SNAP Federal Assistance Program on sales growth rates. We expect this headwind to persist in the remaining quarters of the year, being a low single-digit impact on our U.S. comparable growth rates.
With the strain on household budgets and dynamics in the political environment, we see a widespread rise in social tensions, which are unfortunately leading to more incidents in our stores. We continue to see different patterns and disruptions from climate impacts, such as the fires in Greece, or in general, more seasonal volatility in weather, which is affecting harvests and supply chains. Nevertheless, from a competitive perspective, this environment plays to the strength of our company, and we are well-positioned to deal with whatever comes our way. Therefore, taking all the moving parts together, I'm pleased that we are in a position to increase our free cash flow guidance for 2023 to a range between EUR 2 billion and EUR 2.2 billion. We also reaffirm the rest of our guidance.
As I said earlier, I'm proud of our performance and where we are heading, and you can continue to depend on us and our great, great teams to deliver consistent financial performance, to leverage the strength of our portfolio, and to complete our transformation projects, to evolve our loyalty programs and own brand assortment, to drive brand strength and relative market share gains, and above all, to remain focused on our central role as an active member of the communities that we serve, offering solutions for every wallet, both online and offline, and through offering extra help and care in times of need. With that, I would like to thank you for your continued interest in our company. Operator, please open the line for questions.
Thank you. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, that is star one one to ask a question. Please stand by while we compile the Q&A roster. We will now go to your first question. One moment, please. Your first question comes from the line of William Woods from Bernstein. Please go ahead.
Good morning. Thanks for taking the question. The 1st one is on food inflation. Obviously, you've called the peak of food inflation, so that you're past it. Could you just comment on your outlook of how food inflation will trend over the next kind of six to 12 months? Do you think it'll last higher for longer? Are you still seeing some kind of structural pressures in some categories? I suppose any differences between Europe and the U.S. Just moving over to the U.S. business, are you still seeing continued improvement in the Stop & Shop share and continued improvement? Has there been any change in the promotional environment within the brands there? Thank you.
Yes, thank you very much for those two questions. Those are also, for us, for example, very relevant, of course, food inflation and the outlook. I heard an echo. I hope, a m I still with you guys? Can you still hear me?
Yes, we are.
You are loud and clear, sir.
All right. Okay. If you look at the June inflation, the food inflation in the U.S. at 4.5%, but for example, a double-digit inflation in Europe with 11%, 11.7 in the Netherlands. There's a different rhythm of inflation, but we see in both geographies, inflation coming down. We do not expect for the remainder of the year a negative development, but we see that inflation is coming gradually down. Of course, Europe is more impacted by the war in the Ukraine, by energy, and by commodity prices than the U.S. is. If you look at commodities, as well, another question there, there is a demand and supply commodity view, which is different in U.S. and in Europe.
For example, in, in U.S., and in Europe, by the way, dairy is coming down quite dramatically. Dairy as in milk products, but also as in cheese and as in in in yogurts and all these kind of things. Eggs is coming down firmly in the U.S. because the avian flu is absent. Beef prices are going up in the U.S., and that is commodity-related. In the Netherlands, we see or in Europe, we see a little bit more impact of climate. We have quite some adverse climate situation with floods and and droughts. Potato and onion prices are going up because harvests are halfway down. Wheat prices are still going up, sugar and olive oil, too. Now, that is a different situation, partly for the U.S., in those categories.
A mix there. What we see overall, inflation is coming down, can depend, as I just mentioned, by category. The supply chains are getting more, more professional and more, filled there. Also, our supply chain is helping there. I think for customers, it gives, gets more opportunities to buy the product. If you look at the U.S. business, we see in the U.S. a couple of things I mentioned in my, in my introduction, a few things on inflation is coming down, in principle, good for households. We see SNAP and emergency funding of the government coming down, not good for households. We see that vendors also are very interested to have, again, positive volumes in their business. We see an increased vendor funding in our business coming.
We see promotional levels going up. The vendor funding in the U.S. is not at pre-COVID levels yet, but we see an increase there. I think we are a very interested partner for them to invest further with our number one and two positions on the East Coast and our strong business overall in scale. We see an increased interest in funding there. That's why we see a more moderating inflation, not going into negative for the remainder of the year. We see more promotional money coming into our business, and I think that should should be a good balance for the remainder of the year when we play this right as a company.
Understood. Thank you.
There was a question on the Stop & Shop performance. Before I forget that one, we don't have the numbers yet for the 2nd quarter from Nielsen. The 1st quarter showed overall for the total company, a 20 basis points gain. We expect a flat outcome for the 2nd quarter, and it will differ by brand, but we have to wait for the Nielsen numbers before we know that.
Great. Thank you.
Pleasure.
Thank you. We will now go to our next question. Your next question comes from the line of James Grzinic from Jefferies. Please go ahead.
Yes, thank you. Good morning, Frans and JP. Just a couple of quick ones. The first one is, Frans, I think you referenced a new agreement impacting the second half labor costs, and how you were just really focused on that. Can you perhaps expand a little bit on the details of that, and then what sort of incremental fixed inflation you're thinking after that, that you need to backsolve? And I guess secondly, very briefly, how much of that EUR 377 million tax Belgian tax receipt is built into the new free cash flow guidance, please, for the full year?
Thank you, James. On labor costs, we had a few CLA negotiations, which came with some disruptions, as you might have noticed. That was mainly a topic for the Dutch market, both for our logistics business and for our stores. Those negotiations have been closed on sector level, so the total retail sector. We closed those contracts with a 10% increase, which is, of course, historically high, but it's a sector-level playing field element. It means that we have now a calm, social environment here, which is important with the social partners. We have agreements and good agreements. Everybody's back to work.
We also see that the business is developing well, the Albert Heijn business developing well, within the historically strong market share. We see, we see that more and more customers find their way into our stores, and we might be able to later on to talk a little bit more about why that is and why our proposition is that strong. In Belgium, we have also strong labor cost increases, not so, so much CLA negotiation necessarily, but because of indexation, which is also a level playing field topic. Of course, this is burdening the Belgium market already for a longer time. One of the reasons also to see what is a more agile business model for us in Belgium. On other CLA topics, there's not a lot of things happening in the U.S.
There's no big CLAs outstanding there. We have a small CLA up Stop & Shop, but it's a very small one, and we have Giant Food at the end of the year. I think it's a rather overseeable climate. Of course, in retail, if it's a level playing field, that's good news because everybody has the same challenge. I think we have proven in the last years, historically, that we're pretty good in driving productivity and finding new solutions through technology and digital, to make sure that we have smarter solutions, smarter ways of working. If you look at our stores in Europe, you see all those elements coming in from, yeah, labor-saving elements, but also be more efficient in working, and AI is helping us already here now. The second question was.
What is it?
The Belgium taxes. Yeah, all of the Belgium taxes are included in the guidance, so the total amount is in.
Just on that last point, sorry, Frans, just to clarify, that should be a net EUR 377, and you don't expect any reversal over the balance of the year?
No, just, just to give you a little bit color on that free cash flow, because it might be a question on more minds in the call here. We gave you a free cash flow guidance, an upward guidance for the full year of EUR 2 billion-EUR 2.2 billion , which was around EUR 2 before. We have a few elements which we know already in the first half. We have a tax return of EUR 377 million, which is there. We have a number of things in Belgium, which we have to digest. We also have our Accelerate program.
A few topics are already mentioned in this call, but we have an ongoing Accelerate program where we would like to simplify our business, where we would like to make the right choices, where we on the way to make e-commerce more profitable and profitable in 2025. Those all initiatives, the running, the initiatives which you already know in the first half and the initiatives which are coming in the second half, are included in our guidance. That's why we gave you the guidance, and that is all in, I would say.
Very clear. Thank you.
Yep, pleasure.
Thank you. We will now go to your next question. Your next question comes from the line of Nick Coulter from Citi. Please go ahead.
Hi, good morning. Apologies, it's a two- question, but the first one, just to come back on James's question there on free cash flow. Apologies to labor the point, but I think you're right in thinking that it's on quite a few minds this morning. Can I ask if the EUR 377 million was in the guidance already that you'd issued? Then if the right way to think about this is that you're utilizing inflow to kind of get on with the initiatives, the forward-facing initiatives, that you have outlined. Then I guess if that's the case, what were the underlying drivers to the free cash flow guidance upgrade? Secondly, another follow-up, if I may, please.
Just on whether you expect to see shelf edge deflation in the U.S. next year. You kind of left us hanging with your, your comments, Frans, around not expecting negativity or deflation this year, but clearly, it will be a question on people's minds for next year. If you, if you could talk to the possibility of deflation for next year, noting that wage inflation is still playing through. Those would be my two. Thank you.
Thank you. Apologies when I have not been 100% clear. In our guidance, in our previous guidance, a part of that tax settlement was in, but we didn't know what the outcome would be of that settlement negotiation. A part was in, and now we have the money in the bank. That's what our conservative view and prudent view is. We only come out when the money is there. The EUR 377 million is now in the bank. A part of that money was in the guidance, and a part was not, because we now know the final result of that settlement.
The other thing is that, I mentioned, I hope I was clear there, that we have an environment in the second half where we have Accelerate initiative, but we also still have a rather dynamic outlook as the total market is rather dynamic. I'm pretty happy with upping our free cash flow guidance therefore. Underlying reasons why we think we are optimistic is that we see a better margin profile in Europe. We see also an opportunity to have a better job done in the second half as well on the working capital performance. There are a few elements there which gives us a positive outlook on that free cash flow guidance for the full year. The next year, inflation, I think, is your question in the U.S.?
Sorry, sorry, if I could just come back. How much was in the original guidance? If you don't mind me asking specifically, just to the-- it will be on people's minds in the market, whether this is an underlying upgrade or downgrade for, for free cash flow. Apologies.
Yeah. I would say, roughly about half was in, and we see, based on the operational cash flow and based on the outlook and based on the full year expectation for Accelerate, we see this ourselves as an upgrade on our free cash flow. Hopefully, we are clear there, but in the end, it's your interpretation. On the next year.
No, it sounds, sounds like it's a net nil, but you're taking the opportunity to, to accelerate, so that, that, that's, that's helpful, from my perspective.
Yeah, Accelerate is a serious program. It's meant to simplify the business. You saw AES, the Jersey facility. You saw our courageous, determined initiative by the Belgium team for our business model reconfiguration. Those are elements there, and that's what we said earlier when we talked about Accelerate. We would like to simplify, improve our business. In the same fashion that we also took courageous and principled steps on our total supply chain on the East Coast of the U.S., where we also tremendously changed that supply chain. It comes with changing and a changing pain, but we now already in a situation where we have 95% of the supply chain under our own control. The Chester network, the Chester DC is coming this week, or is coming now to the network.
These kind of things are all meant to make sure that we have a more solid, simplified, and in the end, more agile and profitable business, and that's what Accelerate stands for. That comes with one-time cost and decisions you take based on a very solid business case and good, good value creation. For next year, inflation in the U.S., we think it's coming down and it's now 4.5%. It could mean that we have already a zero inflation level this year. Expectation for next year is a little bit difficult. I don't have that crystal ball based on commodities and all these kind of things, but inflation is coming further down in the U.S., that's what we expect, and faster than in Europe.
If there's a deflation environment next year in the U.S., how do you think about your, your operating model, and I guess the context of historically high margins through an inflationary period?
Let's not forget, when I talk about inflation levels, then I talk about two things. I talk about commodity levels, and that is raw materials price, that's one thing. The other thing is, I also talked about stronger support from trade funds from our, from our vendors, and that is a very beneficial, income lever, of course. The other thing which we work very hard on, is, when you talk about Save for Our Customers, our EUR 1 billion savings program, that is, of course, also, accretive, and that is also helping us, and that is what's, what is helping us already for years.
To have a also very, a very strong margin in the U.S., which people, which people asked us a couple of years, how, how sustainable is that? Well, with the 4.6% margin also this year, in the U.S., I think we are confident that we are very well positioned. Strong brands, strong relative market shares, and proactive investments in our business, $2.5 billion for the total company, investing in digital technology, AI, productivity, automation. I think all these elements will help us also for next year, even if raw material inflation is coming down.
That's very helpful. Thank you, sir.
Thank you. We will now go to your next question. Your next question comes from the line of Andrew Gwynn from BNP Paribas. Please go ahead.
Hey, good morning, friends. Yeah, apologies, because I'm going to come back to cash flow, and I know you're not the CFO, so yeah, again, apologies. What's the total tax payment for 2023 anticipated at? In 2022, the level of tax payment was really pretty low versus the P&L tax. I'd assume certainly there was a bit of a catch-up effect in 2023. The total kind of net tax paid in 2023 would be very useful for modeling.
The second question, online does seem to have re-accelerated a bit in this quarter. I think, particularly, of course, you call out Bol, but even in the U.S., the e-commerce business is trading a bit better. Do you think we've sort of turned the corner, is sort of growth officially back? Any thoughts there would be very welcome. Thank you.
Okay, give me a second for the tax question and the position you need. This is not on my heart disk as a day-to-day CEO, but we'll come back to this in this call. My colleagues here are looking at the files. On the e-commerce business. Yes, I think it's true, I mean, with a lower inflation level and still 9.3% online sales, net consumer online sales, we're quite happy with that development, and we think also that we gained share, both in the U.S. and in Europe. We're also very happy with the 10.5% for Bol, where we know that we gained share, although the data on market market shares in the U.
In, in the Netherlands on e-commerce are rather proxies, but we gained share, also in, in the Dutch market. Another good thing with Bol is that we also gained, let's say, a lot of more loyalty with a growth of our logistics via Bol and our advertising via Bol. The advertising income is also going up, which of course, will help also our bottom line. The third thing is that you see that in Bol, we are now going to new categories, where we think we can compete even stronger.
We also opened a new warehouse for XL, for extra large items, which gives us the opportunity also to compete more in the areas of big TVs, white goods, big items, air conditioners, and these kind of things, which is opening up a new strength in our categories. We are already very strong in brown goods, so electronics, but we think that we have here a big opportunity in the market. I'm very optimistic about our online sales, both in Bol, at the general merchandise marketplace, as well as in our food section.
I noticed otherwise, this morning you were talking again about the sort of prospect of listing bol.com. Is that just sort of open thing again at this moment or anything more concrete?
Sorry, could you repeat that question because I didn't get it?
I, I think on Bloomberg this morning, you were talking about the prospect of listing, Bol. Obviously, that has been a project that's been put on the back burner. Is it still on the back burner or is it something which is more active?
I hope I was very clear this morning with Bloomberg, because I said we interrupted that, interrupted that IPO process because the market timing was not right, but that project is not off the shelf. That's why we are happy with the sales development. That's why we're happy with the margin development of Bol and also the EBITDA margin development. We come back to the market with our plans, because the IPO idea is still, is still on the table when we think that the market timing is right.
Okay, very clear. I'll let you come back on tax in due course. Thank you very much.
Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Sreedhar Mahamkali from UBS. Please go ahead.
Yeah, Frans and JP, good morning. Thank you. Just one clarification back on the free cash flow, Frans. I suppose you're now regretting the upgrade, drawing all the attention to it. The question is, have you also, to these Accelerate projects, have you brought them forward to 2023, perhaps, given the cash inflow from the Belgium refund, EUR 377 million? Is that what happened here to explain the delta in the free cash flow guidance? i.e., why is it only going up to EUR 2.2 million, is really the question on all our minds. Does the discretion and nature of these projects being brought forward into 2023 consume some of that away? Is that the explanation? That's the follow-up. A couple of questions then, one on the U.S. and one on Belgium.
You, you've talked about continuing lower inflation, potentially going down to zero by the end of the year in the U.S. You've also talked about a low single-digit impact from SNAP in the U.S. in the second half. Taking, taking those into consideration, is there anything we should be thinking about margins in the U.S.? I know you don't necessarily guide on segments, but just help us understand, is it reasonable to continue to think the Save for Our Customers and efficiencies from distribution will help you offset any of the pressures, and we should see more or less stable profile and more in the U.S. margins or anything else we should be aware of?
That's on the U.S. margins. On Belgium, helpful to see the progress of 15 stores in the next couple of months into franchisees. What are the next steps for the remainder of the stores, and is there a timeline? Does the transfer of 15 signal you're now able to really confidently assume some timelines into rest of the, to transfer the rest of the estate to franchisees over the coming months? Thank you.
Well, that's a whole shopping list Sreedhar, but let's, let's start with this. Thanks for your interest in the company, of course. I think, brought forward of initiatives, I think is not the way we think about this. What we think about, we have more determination. Looking at the dynamic environment, looking at our strength of our P&L and balance sheet, we felt, we felt it's the right timing now to have with more determination, attack a few of these kind of things, which, on the longer run, in the mid and longer run, longer term, are simplifying our business, make it easier for us, reduce our cost, and in the end, have a benefit for both customers and, and bottom line. That is more, that is more the effect there.
As I said before, we take into account here the first half and the second half Accelerate projects. One of the things, as you know, is also to bring our e-commerce to profitability, so those is one of the element of determination, too. The Belgium situation, we have announced Monday, 15 stores being signed out of the 128. I consider that to be good news because, first of all, we have first-class entrepreneurs coming into the network, 15 of one-third existing entrepreneurs who already work with Delhaize, and one third new entrepreneurs, and one third entrepreneurs coming from our associate base. It gives a lot of confidence to us and to the market that people see, hey, this is a great brand to be owner of and to be an affiliate here, which is 1 good news.
The other good news is that, we also have very clear agreements with our associates who are moving, to an affiliate environment, and where we kept the labor conditions as they were, because that is how our values are organized. And they also get a transition premium as well. And I think also, I could imagine that gives also a level of comfort to our social partners as well, that we do this in a very careful way, when we, when we have those employees transitioned. On, margin stability, with all the programs we run, we talk about Accelerate, we talk about Save for Our Customers. There's of course, our intention, to have a stable margin environment in the U.S.
I, I mentioned before that, we, we intend to come back to historical margin levels in Europe, and they are not there as you, as you have seen, and with the initiatives we run, in Europe, and the energy, hopefully, which will be much more released next year in 2024. We hope also that those margins are also, coming back and bouncing back to historical levels over time. On the tax question, we paid taxes in 2022 of around EUR 400 million, and we're going to pay taxes in 2023, about EUR 240 million. For this year, that would mean a low 20s ETR.
Frans, if we can very quickly follow up on the Belgium. Is there a clear pipeline now of transfers coming through, or is it all s ubject to further negotiation?
Sreedhar, we embarked on this project, which has been initiated by the Belgian team and very much endorsed and supported by the group, of course. This is an, it's a big project with quite some impact and impact and uncertainty for people and for customers and potentially for entrepreneurs. That's why we have engineered this project very careful and thought this through up to the end. That means that gradually over time, we will franchise or affiliate those stores, gradually over time, we also will convert them from a company-operated operation into a affiliate organization. The first 15 announced, I expect another 15 also for this year.
The first 15 will be converted in October, November, and the second 15 will also be announced this year, but it will bring us into 2024. We have a big interest in those stores because we have super locations. You can imagine when you're 155 years in business, and you're one of the first companies who could choose locations, our locations are extremely of very high quality. There's a big interest on 128 stores, and we go now batch by batch gradually over time with a final finalization in 2024, and I'm very confident this will go well.
The first 15 stores are completely in line with our business plan, but also very much in line with both the affiliates' interest. We have good entrepreneurs into who are excited about becoming the owner and the entrepreneur in the Delhaize store. We have also positive feedback from our associates who see what it means to transfer to an affiliate owner, and also how we treat them from a human and contractual point of view. Was that clear enough answer, Sridhar?
Thank you. Yes.
Yeah, pleasure.
Thank you. We will now go to your next question. Your next question comes from the line of Robert Vos from ABN AMRO- ODDO BHF. Please go ahead.
Yes, hi, good morning. Thanks for taking my questions. My first question is on Europe. Your 3.2% EBIT margin was quite strong, stronger than expected when looking also at consensus. I thought you said earlier that the impact from energy costs should be a bit easier in the second half, likely also no or a smaller impact from strikes in the second half. You mentioned that in Q2, the impact was, of these two, was 70 basis points negative. Is it fair to assume that sequentially, the EBIT profitability in Europe should be higher than the 3.2% reported in Q2 in the next two quarters? That's my first question. My second one is on the U.S.
You mentioned an expected low single-digit impact on growth from the termination of the SNAP programs. I assume that this had also impacted growth in Q2 negatively. Can you quantify? Was it a similar effect, so a low single-digit impact on growth from the termination of SNAP earlier this year? Those were my two questions. Thank you.
Thank you for those two questions. On SNAP, yes, also in the second quarter, we had a 2 points effect from the SNAP, the SNAP calibration by the government. That's also, of course, also a industry-wide phenomenon, and that is a negative for those families with the smaller wallets. That assumption is correct. The other assumption you made is, will we have a, for the second half, the European margin and an uptick effect, a better European margin? That, that assumption is also fair.
That's very clear. Thank you.
Thank you. We will now go to your next question. One moment, please. Your next question comes from the line of Fernand de Boer from Degroof Petercam. Please go ahead.
Yes, good morning, it's Fernand de Boer from Degroof Petercam. Sorry for coming back on the cash flow comments, but in the previous quarter, in the conference call, I thought it was Natalie who actually said that this EUR 377 million was not included in the cash flow guidance of EUR 2 billion. Could you please clarify if, you know, half of that was included in the cash flow guidance? What-- which one is not correct then?
Coming back on Belgium, because I thought in the press release of Monday of Belgium group, of Belgium, Delhaize Belgium, it was said that everything had to be completed before 2028. Also this morning, there were quite some press articles on, let's say, the franchisees, of the existing franchisees not happy with the changes in the conditions you are preparing when their contract expires. Could you comment on that? Because it seems now that there are, the new ones will have different conditions than the old ones. What's the risk here of things getting disturbed, disrupted?
Thank you, Fernand de Boer. I think I can clarify a few things here, which might have been confusing for whatever reason. We checked here internally, Natalie did not say, has not said that there was no, no tax at all included in the guidance for the first half, in the first half. What we shared with you now, that half, of, of that amount was assumed in the full year guidance, knowing that we did not know what the settlement exactly will be and what will be landing on the bank account. That's one thing. The 50%, what we mentioned before, is the, is the right, the right understanding.
On the Belgian stores, we have those negotiations with the entrepreneurs, and we have a high interest for the, from, from the market, as I mentioned before, so I'm very confident that we will have a good closure here. This project will take us up to 2024. What we said in the press and for also for our social partners to be very clear there, that if in the, in the care, in the, in the rare case that we would not close one of these 128 stores, that we would carry a company operated of that specific store or stores, in the, in the rare, in the rare case, up to 2028.
We gave an operating guarantee, as a company, that we would have employment and operate in the store up to 2028. We intend, and we have a big interest here, we intend, and to expect that in 2020 or 2024, we have, transferred, signed, and converted all the stores.
Okay, thank you very much.
That is on that part. Yeah, I mean, on the other thing is store by It is a store-by-store operation, and of course, so there's a lot of moving parts and moving elements in a store, location, and the leases, and the equipment, and the contract. That I think is normal, but I think we have very smart entrepreneurs in Belgium, and we have a good organized Belgium team so that we make the, make the right conclusions here for both parties, and that we have a mutual interest, transfer, transfer here.
Okay. Okay, thank you very much.
Thank you. We will now take our final question for today. One moment, please. Your final question comes the line of Izabel Dobreva from Morgan Stanley. Please go ahead.
Hello, good morning. I'm sorry if the questions have been asked because I missed some of the call, my line disconnected. I had three questions. Firstly, on the free cash flow guide, I'm sorry to come back to this, and I'm going to try to simplify the earlier questions. I guess what's really on our minds is, are you upgrading the operational free cash flow guidance? If we strip away the tax, the restructuring costs, and so on, are you upgrading your expectation of what the business will operationally deliver from a cash flow perspective? If so, where does the delta come from? That's the first question. My second question is on private label penetration. How would you expect this to evolve in a disinflationary environment?
Do you think that the gains in penetration, which you have reported, are going to be sustainable and durable, or would you expect to see a little bit of a reversal as the inflation rates start to come down and the cash flows are under less pressure? Then my final question is on the U.S. margin. I think last quarter, you mentioned that there were still some small tailwinds to come from shelf availability improvements, as well as normalization of the supply chain. I was just wondering if you could give us an update there, and whether you see any further benefit to come to the margin from those two factors over the second half?
Thank you, Isabelle, and we forgive you that you're a little bit later and that you have not heard everything, but I think, I'm happy to once more, give you a little bit more clarity on the free cash flow. On your question, is the upward guidance of the free cash flow also fueled by a positive view on the operating free cash flow? The answer is yes.
The second thing is, on the margins in the U.S. and supply chain and shelf availability, I mentioned why we believe that we will have a strong U.S. margin also going forward, because we have strong positions and all these kind of things in the marketplace, which we already proved for many quarters, that we have a strong business and therefore a market leading margin in the U.S. We also said that we have, we spent money with Accelerate, and we have initiatives with Accelerate, which are focused on simplifying the business, and making the business more agile, and in the end, also more competitive. We have a lot of investments in digital, and tech, and AI, big initiatives with PRISM, in our U.S. business. The loyalty programs get a better quality.
We get more media, media monetization income. We have a Save for Our Customers program, which is very strong. There are a lot of elements which give us the confidence that we can stabilize, have stabilized, U.S. margins, and supply chain plays a role there. What I mentioned before, 90-95% of our supply chain is now self-distributing with the Chester warehouse coming to the family. We see a better effect on availability. We see a better effect on freshness. We see a better effect on working capital and more to come in the second half of this year is our expectation. There are still a few categories industry-wide, which are weak.
HBC is still not easy on availability, and pet food is not easy on availability, but that is not our issue, that is the industry's topic. So I think, yeah, I think I'm positive about the positioning of our U.S. business, the online penetration of our business, so I'm quite optimistic there. Your last question, what was your second question, the private label penetration levels? What we see, we see different views in Europe and the U.S. In Europe, and most of you know, we have a 30% penetration level in the CSE countries and roughly 50+ in the Benelux countries. We see in those countries a stronger demand for our price entry products, the price favorites.
6,500 in Europe already on the shelf, 2,000 at Albert Heijn, 1,000 in Belgium, also the CSE countries are following suit. Those products are great value, but also great quality. Why do I say that last? Because that means if, for example, inflation is coming down, or households would get more income, available income, disposable income for groceries, I don't see those shares coming down. First of all, we have, apart from price entry, we have in the midsection and the highest section of private label, very cool and interesting products if you have a little bit better wallet. The price entry products are very well-priced products, but also at the same time, very good quality. I mentioned in my text, award-winning, and that is not just a brag.
You know, that we have, we have brands which are chosen in the Dutch market as the best private label product, the price, price favorite product, for example, detergents, dishwasher tabs, and these kind of things. We see indexes of the products of 200%, 300% in volume. I don't expect that those private label penetration rates will go down. Good products, price entry, but people might, within our private range, move up when there's more income into mid-tier or higher tier elements of our private label range. I think, coming back to the U.S., I think in the U.S., we still have an opportunity to grow our total private label sales, which we see now growing, by the way. Small dip in COVID, we see it now coming back, and we see it growing.
If you look at the plans of the U.S. team on private label, both in fresh and in center store, I see an upward potential there, and that is also there to stay, I think. That is, because, yeah, I think those products have a very good price-quality proposition. Were those answers to your question, Izabel?
Yes, thank you very much.
Pleasure. operator, thank you very much for your support today. we would like to close the call.
Thank you. I will hand the call back to JP for closing remarks.
Thank you, operator, and thank you for all your questions. For any questions we didn't get to today, please feel free to reach out to the IR team during the day, and we look forward to seeing you guys on the road, tomorrow and also throughout September and October. Thank you very much.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.