Today, we published the results of the Q1 2021. It was a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers. COVID-nineteen continues to impact our industry and we're no attrition. But if you look at our business over the last 2 years, you really see an improvement of our momentum both in the U. S.
And Europe as evidenced a system in our 2 year growth stack rates. Over 2 years, our comparable sales in the U. S. Ex gas grew by 15.5% and in Europe, it's 18.1% in Q1. A few other items stood out for me this quarter.
First, we closed addition of FreshDirect, a online pure player, New York based, really giving us a new stronger position in that market. A second was on the health and sustainability front where we continue to make big progress in the Q1. One item important to me in particular is the a similar pattern. It was €600,000,000 and we were able to price it effectively, tying it and our commitments to sustainability targets very much around Scope 1 and 2 emissions as well as food waste. A strong quarter,
where we really noticed the resilience of
a strong quarter. We started 2021 strong and we remain well positioned for the changing needs of consumers, whether it's working more from home, eating healthier or getting fresher food delivered to their homes. Thanks and see you next quarter. Q1 2021. It was a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers.
A. COVID-nineteen continues to impact our industry and we're no exception. But if you look at our business over the last 2 years, you really see the improvement of our momentum both in the U. S. And Europe as evidenced in our 2 year growth stack rates.
A sales. Over 2 years, our comparable sales in the U. S. Ex gas grew by 15.5% and in Europe, it's 18.1% in Q1. A few other items stood out for me this quarter.
First, we closed the acquisition of FreshDirect, an online pure player, New York based really giving us a new stronger position in that market. 2nd was on the health and sustainability front, where we continue to make big progress in the Q1. One item important to me in particular is the sustainability linked bond. It was €600,000,000 and we were able to price it effectively, tying it and our commitments to sustainability targets a strong quarter very much around Scope 1 and 2 emissions as well as food waste. We started 2021 strong and we remain well the patient for the changing needs of consumers, whether it's working more from home, eating healthier or getting fresher food delivered to their homes.
Today we published the results of the Q1 2021. It was a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers. COVID-nineteen continues to impact our industry and we're no exception. But if you look at our business over the last 2 years, you really see an improvement of our momentum, both in the U. S.
And Europe as evidenced in our 2 year growth stack rates. Over 2 years, our comparable sales in the U. S. Ex SCAS grew by 15.5 percent and in Europe it's 18.1% in Q1. A few other items stood out for me this quarter.
First, we closed the acquisition of FreshDirect, a online pure player, New York based, really giving us a new stronger a position in that market. 2nd was on the health and sustainability front where we continue to make big progress in the first the quarter. One item important to me in particular is the sustainability linked bond. It was €600,000,000 and we were able to price it effectively, 2021 strong and we remain well positioned for the changing needs of consumers, whether it's working more from home, eating healthier or getting fresher food delivered to their homes. Thanks and see you next quarter.
Our Zimmerse. COVID-nineteen continues to impact our industry and we're no exception. But if you look at our business over the last 2 years, you really see an improvement of our momentum both in the U. S. And Europe as evidenced in our 2 year growth stack rates.
A sales force. Over 2 years,
our comparable sales in the U. S. Ex gas grew by 15.5% and in Europe, it's 18.1% in Q1. A a few other items stood out for me this quarter. First, we closed the acquisition of FreshDirect, a online pure player, New York based, really giving us a new stronger position in that market.
2nd was on the health and sustainability front, where we continued to make big progress in the Q1. One item important to me in particular is the sustainability a multi linked bond. It was €600,000,000 and we were able to price it effectively, tying it and our commitments to sustainability targets Essentials very much around Scope 1 and 2 emissions as well as food waste. We started 2021 strong and we remain well positioned for the changing needs of consumers, whether it's working more from home, eating healthier or getting fresher food delivered to their homes. Thanks and see you next quarter.
Today we published the results of the Q1 2021. It was a strong a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers. A. COVID-nineteen continues to impact our industry and we're no exception. But if you look at our business over the last 2 years,
a strong quarter, where we really see an improvement
of our momentum, both in the U. S. And Europe, as evidenced in our 2 year growth stack rates. A strong quarter. Over 2 years, our comparable sales in the U.
S. Ex gas grew by 15.5% and in Europe, it's 18.1% in Q1. A sales force. A few other items stood out for me this quarter. First, we closed the acquisition of FreshDirect, a online pure player, New York based, really giving us a new stronger position in that market.
2nd a similar pattern. It was €600,000,000 and we were able to price it effectively, tying it and our commitments to sustainability targets very much around Scope 1 and 2 emissions as well as food waste. We started 2020 a strong and we remain well positioned for the changing needs of consumers, whether it's working more from home, eating healthier our getting fresher food delivered to their homes. Thanks and see you next quarter. Today we published the results of the Q1 2021.
It was a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers. COVID-nineteen continues to impact our industry and we're a strong quarter. But if you look at our business over the last 2 years, you really see an improvement of our momentum, both in the U. S. And Europe, as evidenced in our 2 year growth stack rates.
Over 2 years, our comparable sales in the U. S. Ex gas us grew by 15.5% and in Europe it's 18.1% in Q1. A few other items stood out for me this quarter. A sales force.
First, we closed the acquisition of FreshDirect, a online pure player, New York based, really giving a new stronger position in that market. 2nd was on the health and sustainability front, where we continue to make big progress in the Q1. One item important to me in particular is the sustainability linked bond. It. It was €600,000,000 and we were able to price it effectively, tying it and our commitments to sustainability targets Essentials very much around Scope 1 and 2 emissions as well as food waste.
We started 2021 strong
a consumer
and we remain well positioned for the changing needs of consumers, whether it's working more from home, eating healthier or getting fresher food delivered AZER Homes. Thanks and see you next quarter. Today we published the results of the Q1 2021. It was a strong quarter where we really noticed the resilience of associates and the trust placed in us by our customers. COVID-nineteen continues to impact our Industry and we're no exception.
But if you look at our business over the last 2 years, you really see an improvement of our momentum both in the U. S. And Essent Europe as evidenced in our 2 year growth stack rates. Over 2 years, our comparable sales in the U. S.
Ex gas it grew by 15.5 percent and in Europe it's 18.1% in Q1. A few other items stood out for me this quarter. First,
we a
closed acquisition of FreshDirect, a online pure player, New York based, really giving us a new stronger position in that market. A second was on the health and sustainability front where we continue to make big progress in the Q1. One item important to me in a pillar is the sustainability linked bond. It was €600,000,000 and we were able to price it effectively, tying it and our investments to sustainability targets very much around Scope 1 and 2 emissions as well as food waste. A strong quarter.
We started 2021 strong and we remain well positioned for the changing
Ladies and gentlemen, good morning, and welcome to the analyst conference call in Q1 2021 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. All 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 statement.
The investors section of our website, aholddelhayesdot
between the U. S. And Europe. And we'll continue of course to support health and safety measures, Our brands together with our suppliers remained focused on fulfilling their vital role in society by maintaining food and product supplies to local communities. And in addition, our U.
S. Brands have support vaccinations through their pharmacies in the U. S. I remain thankful for the efforts of associates who have had a consistent focus on safety, while at the same time providing great customer service and community support. Now let me focus a little bit on the financial results.
Nathalie, of course, will go into more detail on the financial performance in the Q1 as well as to our outlook for 2021. And for now, you can see in our press release and slide 4 some of the highlights. A. Although COVID-nineteen continues to impact our results positively, we have now entered a period where our year over year growth rates are affected by the lapping of difficult prior year comparisons. That said, we began 2021 in a strategically much stronger position than before the COVID-nineteen pandemic began.
Overall, we are very pleased with the underlying first quarter performance in both the U. S. And Europe. Our 2 year comparable sales stack sequentially accelerated in the Q1 2021 versus the Q4 2020 in both the U. S.
And Europe, as we've been able to retain a strong level of underlying consumer demand a subscriber by continuing to adapt to the enduring consumer behavior changes. These behaviors include increased working from home, preference for healthy fresh products and of course higher online demand. For those that are less familiar, a we have spoken to a 2 year sales comparable sales growth rate or what is also referred to as a 2 years comparable sales a strong stack. This is simply the comp growth rate in the current year added to the comp growth year in the prior year. And because of the volatility of the course of the prior year quarter, a significant contribution from the 2 years comp stack is a helpful measure and proxy to gauge the momentum between periods.
And then as I mentioned, It was actually quite a good trend for the quarter as well. Growth in our leading local omnichannel platform also sequentially accelerated With nearly 190% net consumer online sales growth in the U. S. And nearly 80% growth in Europe in the quarter at constant exchange rates. Underlying operating margins were also very strong in the context of historical levels prior to COVID-nineteen.
While COVID-nineteen continues to create significant uncertainty in 2021, the outstanding Q1 results provide us with the confidence to raise our underlying EPS and group net consumer sales growth outlook for the year as you have seen in our report. A. Moving to Slide 5. We began 2021 in a strategically stronger position versus COVID-nineteen as such. We remain confident that our 2 year stack comp growth rates will be visibly better than they were pre COVID-nineteen.
And you certainly saw a significant increase in the market that happened this quarter for the reasons I mentioned a few moments ago. In this slide, we highlight some of the initiatives to increase our share of the consumer wallet and improve our online capabilities. In 2021, we are continuing to increase our online capacity. A. A few examples are the opening of our more U.
S. Click and collect locations and a new home delivery fulfillment center at Albert Heijn. We are moving forward with the launch of Ship to Me in the U. S, our endless aisle offering of more than 100,000 general merchandise and food items a steady stream in the second half of this year. We are expanding our no fee home delivery service of Albert Heijn Compact to additional markets in the Netherlands a strong momentum, we now expect net consumer online sales to grow by over 40% in 2021 a sales versus 30% previously indicated.
And this includes raised expectation of over 70% growth in U. S. Online sales a subscriber versus 60% growth previously. It also reflects the expectation for at least €5,500,000,000 a net consumer online sales at bol.com versus at least €5,000,000,000 previously. Improving omni channel productivity also remains a high priority, and we strive to improve online productivity by 20% this year a sequential improvement of processes, systems, operating practices and innovation.
A. Slide 6 highlights some of the key achievements in the U. S. In the U. S, we delivered accelerating levels of online growth of nearly 190%, a significant increase in sales from FreshDirect, which we acquired in January, growth accelerated to 135%, a subscriber and FreshDirect is progressing as planned.
We are in a good position to continue capitalizing on the high online demand a with our U. S. Household coverage now 90% 95% through home delivery and click and collect. We have household coverage of 94% a significant improvement in coverage over the prior year. Also, the Stop and Shop remodeled stores a sales uplift, and we expect to accelerate the number of remodels in 2021 to approximately 60 stores.
Food Lion achieved its 34th consecutive quarter of positive comparable sales growth and has successfully added and opened all 62 of the Southeastern Grocers stores, which we acquired in April. Also in April, we secured and opened 9 additional locations a sales that were previously closed by Southeastern Grocers. Slide 7 highlights some of the key achievements in Europe. In Europe, our Benelux ecosystem continued to perform well and we gained market share in both the Netherlands and Belgium in the quarter. We were also pleased with the high level of net consumer online sales growth, which also accelerated, particularly at bol.com, where sales from 3rd And there are now 45,000 sellers on the bol.com platform, both in Belgium and in the Netherlands.
Albert Heijn continues to remodel an additional 29 stores to which fresh and technology focused format in the Q1 And they're all performing in line or ahead of expectations. We will remodel approximately 60 stores by the year end. Albert Heijn continued to expand his home delivery service in Flanders region in Belgium and we're now servicing an additional 100,000 households a totaling 400,000 households in Belgium at the moment. The Delhaize Super Plus loyalty program providing rewards and discounts to consumers of healthy and sustainable products is providing a sales uplift and continues to gain traction. A strong quarter in the Q4 of last year.
Moving on to Slide 8. We continue to make progress in elevating our health and sustainability strategy, a to achieve net zero carbon emissions by 2,050. And in March, Albert Heijn was focused by consumers as the Netherlands' most a sustainable market chain in the sustainable brand index of 2021 ranking the number 1 for the 5th a significant year. Bol.com was voted as the most sustainable e commerce brand in the Netherlands as well. We also successfully priced our inaugural sustainability linked bond in March, amounting to €600,000,000 a strong quarter with a term of 9 years and those are linked to achieving targets in reducing food waste and scope 1 and 2 carbon emissions by 2025.
I'll now hand over to Natalie for the financials.
Thanks and good morning everyone. Our underlying performance in the Q1 was strong and continued to be impacted by high levels of demand due to COVID-nineteen. A strong quarter, where we really noticed the resilience of a strong quarter.
As a result,
net sales grew 5.8 percent at constant exchange rates to €18,300,000,000 and group comparable sales growth ex gas a strong quarter, where we
really noticed the resilience of a strong quarter.
Group net consumer online sales increased 103.3% in Q1 a strong quarter at constant exchange rates. Group underlying operating income declined 6.1% at constant rates a EUR 849,000,000 with underlying operating margin down 60 basis points to 4.6% at constant rates. The margin was strong in the context of historical levels prior to COVID-nineteen. Recall that margins in Q1, 2020 benefited significantly from the timing of unexpectedly higher sales late in the quarter that preceded the COVID-nineteen costs, especially in the U. S.
A. Moreover, this year, group underlying operating margin in Q1 was negatively impacted by COVID-nineteen related cost of approximately €150,000,000 a slightly higher percentage of revenue versus only €70,000,000 in 2020. Underlying income from continuing operations was €666,000,000 a strong quarter, down 11.9% in the quarter. In Q1, we repurchased 13,600,000 shares for EUR 312,000,000
a strong quarter, where we really noticed
the resilience of a strong quarter. Diluted EPS on an underlying basis was €0.54 down 8.4% compared to last year's record Q1 results. A. To put this in perspective, 2021 diluted underlying EPS grew approximately 38% relative to 2019, a reported basis for Q1. Now moving on to slide 12, you heard Frans mention that we have held on to the high levels of consumer demand even as we began to lap the COVID-nineteen impacts from last year.
You can see here why that was the case As comp sales trends on a 2 year stack basis were strong and better than pre COVID levels. There was even an acceleration in momentum as we moved from Q4 into Q1. In the U. S, we posted a 15 point a 5% 2 year comp stack in Q1, which is a clear acceleration versus the 13.5% 2 year comp sales stack we achieved in Q4. A.
In Europe, it was 18.1% in Q1 versus 13.9% in Q4. So we have good momentum clearly demonstrating a strong quarter that our brands are continuing to execute very well in this fluid environment. On Chart 13, you can see even after we adjust for the influences of weather and calendar on the 2 year comp sales stack. It's the same story. Our momentum has been strong and we picked up acceleration from the 13.8% adjusted figure in Q4.
In Europe, it's 17.2% on this adjusted basis versus 14% a sequential decline
in Q4.
So any way you look at it, our 2 year comp sales stack momentum accelerated in both regions. A significant increase in the a 6% at constant rates to €10,700,000,000 U. S. Comparable sales excluding gasoline a segment grew 1.7% positively impacted by demand related to COVID-nineteen, particularly in January February. A.
This represents a stable sales development excluding the 1.7 percentage point of net benefit from calendar shift and weather impacts in the quarter, a strong quarter mainly related to winter storms and the Easter shift. Challenging weather results in more consumer stock activity and eating at home and earlier Easter push demand forward into Q1 versus Q2 last year. A strong growth in January February was offset in part by decline in March's comparable sales, which were unfavorably impacted by the lapping significant consumer stock up activity related to COVID-nineteen in 2020 when comparable sales excluding gas a grew by 33.8%. Another important call out of the U. S.
Top line was that our online sales, which increased 188.3 percent in the quarter. Excluding these sales from especially the acquisition of FreshDirect, the U. S. Online sales growth And Q1 sequentially accelerated to 135.2 percent growth versus 128.5 percent growth in Q4 of 2020. Our underlying operating margin in the U.
S. Was 4.8%, down 1.8 percentage points from the prior year a strong quarter at constant exchange rates as margins lapped unusually high levels in the prior year. You'll recall we experienced high COVID-nineteen sales late in the prior year quarter that preceded the COVID-nineteen a strong quarter, where we really noticed the resilience of a strong quarter. In Europe, net sales in the Q1 grew by 9.4% a EUR 7,500,000,000 and the comparable sales increased by 8.3%. Sales were positively impacted by demand related to COVID-nineteen, SG and A expenses.
Again, particularly in January February. To a lesser extent, Q1 comp sales were favorably impacted by approximately 0.5 percentage points from calendar shifts in 2021. Comparable sales remained positive in March despite the lapping of significant consumer stock up activity a significant increase in the year ago period. The increase in sales were
primarily related to COVID-nineteen in 2020 when
comp sales excluding gas grew by 15.9% that month. A net consumer online sales in Europe grew 78.6% in Q1, which was a sequential acceleration from 73.4% growth in Q4. At bol.com, our online retail platform and Benelux, which is included within the European segment results, a net consumer online sales growth accelerated to 76.6% in Q1 versus 69.6% in Q4. A. A big driver of this development was bolp.com's 3rd party sales, which grew 101% in the quarter.
Europe's Q1 underlying operating margin was 4.7%, up 60 basis points from the prior year at constant rates. A strong margin expansion was driven by operating leverage from strong sales growth as a result of COVID-nineteen. A moving on to free cash flow in the Q1 and you see this on Chart 15. Free cash flow in Q1 was up a was €295,000,000 which compares with about €1,000,000,000 last year. This development was largely impacted by an unwind of inventories and accounts payable due to the lapping of high levels in the consumer stock up activity related to COVID-nineteen last year.
A there was also a decrease in net capital expenditure of €217,000,000 as we anniversary the acquisition of several CNS warehouses related to our U. S. Supply chain transformation initiative in the prior year. Moving on to the outlook for 2021 on Slide
a strong quarter, where we really noticed the resilience of a strong team.
While COVID-nineteen continues to create significant uncertainty for the remainder of 2021, our strong Q1 provides us with confidence a strong quarter to raise our underlying EPS growth outlook for the year. The results outperformed our expectations and we've been able to retain a solid level of underlying consumer demand as evidenced by the high 2 year comp sales stack. The rest of our guidance items on the slide our unchanged versus the previously provided outlook. As a quick reminder, COVID-nineteen and to a lesser extent a 53 week calendar significantly distorted our 2020 financial performance. Lapping these effects will impact results in 2021, which returns to a 52 week calendar.
While higher sales demand drove unprecedented sales growth and operating leverage in 2020, This development and to a lesser extent, the once every 5 year occurrence of the 53rd retail week will challenge comparison significantly this year. A. We continue to expect the comp sales trajectory to be better on a 2 year basis in 2021 compared to pre COVID-nineteen levels. And while it doesn't affect our comp store sales, our recent acquisitions of Fresh Direct as well as our stores from Southeastern Grocers and Dain Supermarkets later this year will provide us with incremental sales. Moving on to underlying operating margin, and we continue to expect at least 4% in 2021 due to the strong sales related to COVID-nineteen.
Our margin outlook reflects a balanced approach with cost savings of over €750,000,000 offsetting cost pressures related to COVID-nineteen a strong quarter as well as the impact of increased online sales penetration. We are raising our underlying EPS outlook due to the outperformance of Q1 a strong momentum in the business. We now expect it to grow in the low to mid teen range relative to 2019 a strong quarter versus our previous outlook of mid to high single digit growth. Free cash flow is still expected to be approximately €600,000,000 a strong quarter inclusive of net capital expenditure of around $2,200,000,000 I'll now hand it back to Frans to close things up.
Thank you very much, Natalie. And let me wrap up. We started 2021 in a strategically stronger position when compared to pre COVID-nineteen, We also continue to accelerate our net consumer online sales growth in a meaningful way. We a strong quarter, where we really noticed the resilience of a solid underlying U. S.
Operating margin in Q1 and expanded margins in Europe. In Q1, we successfully closed the acquisitions of FreshDirect and Stores from Southeastern Grocers and are progressing as planned for both of them. The acquisition of Dane Stores in the Netherlands is still on track to close in the second half of twenty twenty one. We are raising our net consumer online sales outlook to over 40% in 2021 versus 30% previously. And this include a raised outlook for over 70% growth in the U.
S. And a higher target for bol.com to achieve at least €5,500,000,000 a strong performance in the quarter provided us the confidence to raise our underlying EPS guidance a strong quarter to lowtomid teen growth relative to 2019. On the ESG front, we are proud to have launched our inaugural sustainability linked bond, amounted to €600,000,000 in March, a strong quarter linked to achieving targets in reducing food waste and scope 1 and 2 carbon emissions by 2025. And we also recently announced our target to achieve net zero carbon emissions by 2,050. We're now looking forward to take your questions.
Operator, can you please proceed from your
a.
A.
A
strong quarter. Thank you. Our first question is from Mr. Rob Joyce of Goldman Go ahead, sir. Your line is open.
Hi, good morning. Thanks for taking my questions. So My 2. The first one, just wondering if you could give us an idea of what you're Seeing in terms of inflationary pressures on input costs in the U. S, how you see those trending now and through the year and whether you see increased inflation being able to be passed through to the consumers versus the way you see it right now?
And the second one is just on bol.com. Well, firstly, quick one within that. Could you tell us what sales essentially the sales are now 3rd party marketplace? And then more broadly, this does look to be one of the fastest growing online assets in Europe of scale at the moment. Do you think the valuation, the value of bol is reflected fully in your share price?
And if not, are you able to, is there other ways to Getting that valuation fully reflected. Thanks very much.
Thank you very much for your question. On inflation, and I think you were mainly referring to the U. S, right? So what we normally do as a routine as a retailer and we do this in inflationary And in deflationary environments and we do this already for decades that we of course when we talk with vendors about price increases That we have a shoot cost model very firmly in place. So we have a whole team of economists looking at the prices for raw materials, For packaging, for energy, for labor, for transportation and so on.
And that should cost model should protect us from not accepting illegitimate pricings. So we protect it very well. At the moment, we see a CPI in the Northeast of 2.5%. That's a normal number we also talk about with you. And we follow those price increases very carefully or those demands for that looking at raw materials and so on.
So at the moment, it's reasonably rational, the market in itself. And we have to see how this develops in the coming quarters. If it's legitimate price increases, then of course, we have the intention to pass that on to consumers, but I think retailers are a good protection for consumers to avoid price inflation as much as possible. On bol.com, Natalie?
Yes. I'll add some comments there. You saw in the Q1 that sales were up 77%. And if we look at the part that's coming from our Plaza or the 3rd party sellers that we work with that grew over 100%. So you're right, we are really transforming that business into
not just being what
are the sales that we do, but really performing that business into not just being what are the sales that we do, but really being a platform provider and that's now over 60% of the sales that come through bull. SVOD and the rest of the year. So yes, it's I agree with you that it is a fast growing, the profitability is improving. It really is something we're very proud of the performance. To your second part of that question, which is, hey, how do we get better visibility and acceptance of the real value creation of that business?
I think it's something where it's all about us giving you information so that you can understand the performance of that business and seeing also how it really,
Our next question is from Mr. Brett Shunis of Wolfe Research. Go ahead please sir. Your line is open.
Good morning. This is Spencer Hanus on for Greg. Can you talk about the cadence of the 2 year stack throughout 1Q and what the exit rate looked like in March? And then has there been any change in momentum in 2Q as both the U. S.
And Europe start to reopen more fully.
Hi, Spencer. Good morning. Thanks for the question because it is one that we're I think really proud of you saw that we talked about the 2 year comp sales stack and showed that there had been sequential improvement in Q1 versus Q4. A strong quarter, where we really noticed the resilience of
Great. That's helpful. And then do you think you'll gain share in U. S. A subscription business.
And then can you talk about the pass through rate and how that's changed from 4Q to 1Q? And how close are we to profitability on that business in the U. S?
Yes. Thank you for that question. You can imagine with the growth rates we showed 190%, 135%, excluding fresh direct that we gained share. So we are very happy with that development. We added capacity last year, quite a lot of capacity.
I think it was a good foresight. That's why I think we are strategically better positioned also to grow this year. And for this year, we see growth of 70% in the U. S. So we upped our growth numbers there.
What was also a great number is that we are expanding our click and collect locations and we have now 95% of our customer base is having access to same day online services. The other thing is that we will increase our productivity with at least 20% in the U. S. And that's also which will make our e commerce sales less dilutive, which is also a good sign. So a lot of things going in the right direction.
And we know that if you talk about fulfillment, if you talk about Last Mile, if you talk about monetization, if you talk about digital footprint, Those are very important drivers to make the business more consumer friendly, but also more profitable. And I think we are making progress on all the
Next questions are Mr. Andrew Gwynn of Exane BNP Paribas. Go ahead please. Your line is open.
Yes. Good morning. Two quick questions. So the first is on the guidance change. Just wondering why the free cash flow guidance hasn't changed.
Obviously, still static at €1,600,000,000 Second question, you mentioned before about the on same day demand within online now reaching, I think you said 94% of your population. Could you just elaborate a little bit more of what you're seeing in terms of patterns there? Are consumers prepared to pay a premium to same day delivery? Is the demand significant versus next day? Thanks so much.
Hi. This is Natalie on the free cash flow. I guess I'd have 3 comments on that one. The first one is, don't forget how significant the working capital unwind is going to be for us this year. You saw that I think really visibly in Q1 and it is something that's going to stay with us throughout the year.
So that's been one of our big thoughts behind that free cash flow guidance. The second one is that, as we have outperformed in the Q1, as we move through the year, one of the things that I think we've really improved over the last 18 months, 24 months is our ability to be agile, more agile with capital allocation. And so as we look at omni channel opportunities and really fueling this growth, as we see opportunities in the growth coming, that is the first place we're putting CapEx incremental CapEx dollars and euros as we have them. And the last one I'd say is stay tuned on this one. As you watch us develop throughout the year, if we continue to have this momentum a that may very well have a positive impact on the free cash flow beyond what we've got in the numbers right now.
You asked for a little bit more color on same day and online and the penetration there. As you heard me earlier talk about this, we are very proud with the progress made in the U. S. 94% same day availability is a big step forward compared to the last quarter and the last year. We see that click and collect is growing faster than delivery, although also our delivery business is still growing at a very high rate.
And click and collect Growth means also a more profitable growth in the end. It's a more profitable fulfillment model, of course, than the rather expensive last mile delivery. We see in the total market more a trend towards same day and in
In the future also
more instant compared to next day services. It has also to do with a few providers in the market to help other retailers To grow in that space, you have heard from us before that for us it's strategically important that we have proprietary fulfillment And proprietary front end software with our customers that the data remain ours with the consent of our consumers. So I think we are well positioned there both from a growth perspective a capacity perspective. We added a lot of capacity and we have capacity to grow that 70% in 2021. Same day growing faster than next day click and collect growing faster more than 50% of our sales is now click and collect which gives us a better view on profitability going forward.
And I mentioned a few other things where we work on also to get our e commerce more profitable. And I think all those dimensions are cruising in the right directions. And by the way, we also see very good uplift in our NPS scores from our consumers. We had we also announced That for Lateran this year, we'll have opened we'll open a next micro fulfillment center for our giant food brand in Philadelphia. So also those innovations and call it partly experiments what is going to help us with fulfillment and automation, They're also progressing there.
Okay. Thank you very much.
Your pleasure.
Following questions are from Mr. Xavier Lemaine, Bank of America. Go ahead please. Your line is open.
Yes, good morning. Thank you for taking my question too, Evan. The first one just in your press release you meant that the brand performance was laid by full line actually. So can we get a bit more clarity? So what does it mean for And if you can comment also the U.
S. Market share for both brands that would be helpful. Second question is on the transformation of the supply chain in the U. S. So Can you give us a sense of what was the cost in Q1 versus Q1 last year and maybe this is Q4?
Okay. If Natalie takes a second, I will take the first. And you broke away a little bit, Xavier, on the first question. I think you asked A little bit more about performance of Food Lion and market shares and Stop and Shop performance. Is that correct?
Yes, correct.
Okay, good. So Yes, we see a strong growth of the Food Lion brand, which is our strongest growing brand as in the previous quarters Has, of course, to do with the positioning of the brand, but also with population and GDP growth in the southern part of the East Coast. We're also very content with the remodeling program of Stop and Shop 60 stores by the end of the year and the stores We have done so far are in line with the pro form a as we indicated before. What we will see most likely with the first a quarter market share data are not available yet. We always get in with a lagging time frame.
So what our feel is with the growth rates we see that we have overall on the East Coast market share gains And that is from an omni channel perspective that we will have considerable market share gains with Food Lion That we have a stable market share with Stop and Shop and that the other brands are also doing well. So we'll have a market share gain on the East Coast. Food Lion, the strongest growing brand and a moderate performance on market share levels From Stop and Shop, but a very strong remodeling program going on.
And on the question you had, Savi, about what's going on in the supply chain costs in the U. S. I mean, this is one of the things for us that is really crucial in transforming our U. S. Business to, I'll say be ready for the future.
And as we look at bringing those supply chain activities more in house, it's really something that this year is changing how we do business. We've brought 2 of the 6 distribution centers in already. By the end of the year, we're going to have 65% of our costs that we are able to negotiate all directly ourselves. So it's I think in a period where we need to get our supply chain more aligned in an omnichannel world that's it. It's important and at a time where inflation is an issue, it means we have more in our own control.
And when you look at the cost this year, I think the big call out I would make is it's just going to be more evenly spread this year across the quarters than last year we saw it was quite back end loaded.
Thank you.
Our next question is from Mr. Nick Coulter, Citigroup. Go ahead please. Your line is
open. Good morning. Hope everyone is staying well. Two questions then, please. Firstly, On Europe, would it be possible to unpack the Europe like for like a little please?
And if you stripped out bol, I assume that's the majority of that The 8%. Or I guess another way of asking the same question would be what you think you've done on grocery share in the The Netherlands and Belgium. And then, Natalie, you mentioned the benefit of both the Benelux ecosystem. Could you talk a little bit more A little more about those benefits, please. Thank you.
Yes. To start, what you call unpack the European number. We already gave you quite some information on how that is growing. Our online business is growing. And also our online business for Albert Heijn grew very, very fast and almost in line with the total number you see here The other thing is that, if you look at the market shares, market share developments and those data we have for the Q1, our market share provider is faster in Europe than in the U.
S. We see that we gained 30 basis points of market share with Albert Heijn in the Netherlands, we're very happy there with the Benelux market share gains and we'll be also very happy as You can imagine with our online performance. What else is
Does that be the online driving those gains? Is that the grocery sharing including online?
Yes. The numbers I gave you are the omni channel numbers as that's the way we look at our consumer. But it's not only driven by online. Also our stores, both Albert Heijn and for Delhaize gained share in the markets as well. So it's not only an online driven element.
And you can imagine and you know that our online in the Dutch market
a is a much
bigger component of our total sales than in Belgium. And in Belgium, the 30 basis points is a remarkable market share gain as
Thank you.
So maybe adding to that because I think there were a couple of little things you had left open. When you talked about the European like for like sales. Let me make very clear that while we're very proud of the bowl contribution and performance, we had the majority and very solid growth in terms of the rest of our EU business. And to the second question you'd had sort of about what's going on with that the comment I made on BOL and ecosystem, in Benelux. I think one of the things that is very exciting for us as we look at our businesses and the Benelux is how we are able to collaborate together.
And this
is something where we're already doing things in terms of loyalty programs where you can work with not only just Bol and Albert Heijn, but also Delhaize. A. You've got our stores are available if you see Atos and other products online that you're able to get at And you're going to see us continue to do more and more of that because we believe really as the consumer becomes omni channel, we have a a real unique position in this market that is not replicable by anyone in terms of how we service those customers both online and directly in store.
How do you hope to replicate that in the U. S? Because obviously you're moving into a marketplace a situation
there as well.
Well,
you've heard about our Ship to Me program, which is the endless aisle, products where we're going to be having later this year 100,000 new SKUs available where for the consumer it'll be a seamless shopping experience. You'll go online a subscription and it will be something where you order it all in one place. It's very easy, single checkout and it allows us there to capture, I'll say the extra incremental margin opportunity of general merchandise with the frequent shopping of that we experience in our stores. So I think that's actually a great way to bring similar learnings to the U. S.
And what we in the meantime tend to forget Not that long ago, we had online through Peapod and we had stores through the brands in Europe and now we have omni channel brands everywhere. So we have Giant Foods, Hannaford and Stop and Shop now as omnichannel brands seamless for customers if it's online or offline. And that has been a big change because customers have a lot of brand awareness and the brands are very strong in the local communities as great local brands. So That step we also in the meantime made and that's now really paying off apart from the extended aisle like Nathie just told and just shared with us.
No, you're exactly right on that one. Franca gives me a lot of energy because the shopping patterns that we see and spending trends of those our consumers as they get on both channels really goes up dramatically. And that's something we've been tracking very consciously in the last year to say, how does that develop, how are what are those trends look like, how much stickiness is there and we remain very confident that's an ongoing trend that's going to positively impact our business as we make that shift to an even more omni channel setup.
Our next question is from Mr. James Grzinich of Jefferies. Go ahead, sir. Your line is open.
Thank you very much. Good morning, everyone. I have two quick ones. The first one is can you help us reconcile the U. S.
Margin dynamics, there seems to be a bit of a disconnect between densities and the 2 year stack being up 15% and margins down 10 basis points. I get the point around the logistics investment, but if you could perhaps explain why such And secondly, do you have some early thoughts in terms of post the upcoming tax reform in the U. S. What the group tax may look like perhaps from next year? That'd be great.
Thank you.
Let me start with the tax reform question. That's one where I would just say honestly it's too early to say. If you look at that, I think there's definitely conversations about space and other issues. I think there's still a lot of open issues there. So we'll see how that one comes at us.
In terms of the U. S. Margin dynamics, I do think this is one where a lot of people have been waiting to see what would happen in the Q1. And remember that there's a I think a cycle of Q4 was a weaker quarter. We had heavy COVID costs and we also talked about that 50 basis points of kind of one time effects that we said wouldn't repeat.
And when we went into Q1, we had again in terms of the comparison, there was a bit of this sort of double whammy that hit us. One is last year we finished Q1 with essentially in the U. S. COVID costs very high in the last 2 weeks and almost zero cost associated with that. It really lagged a bit.
And this year you saw, we talked about at a group level, our COVID cost, the they went over the whole period as opposed to just that short time. And for the group, the number had gone up from $70,000,000 last a year to $150,000,000 this year. So a big last time almost no cost and this time not only the cost But that extra cost of the comparison, but the additional costs that we had in this period. And that was due to higher absenteeism and really just making sure that we were had all of those precautions in place. Having said that, let me make very clear that our expectations for COVID costs going forward this year are that you're going to see that level off very quickly, that some of the majority of those costs have been variable, our absenteeism levels have really returned to much more normalized levels as the vaccine has spread.
So that's something where we believe we're going to see significantly lower costs as we go forward. Which
is also what we indicated last time, right? I mean, COVID costs go hand in hand with COVID sales. Correct. And we have a good control of our variable costs and Our brands are razor sharp focused on that element that if your sales gets more moderated as we already predicted
So I get that, but I presume my question was more around the 2 year stack, So the disconnect on sales density is being up 15% in a 2 year stack. And I presume the positive leverage on sales will be greater than the incremental COVID costs and you're talking Q1, those 150 in a 2 year comparison. So it was really around that.
Yes. I'm sorry. I thought you were talking about on the margin basis. If we look at on the sales basis, you're right. There is a piece when we look at the 1st 2 months of the year where course there's now an inclusion of a COVID supported sales versus where it had been last year.
But what I think is a very promising is that if you look at the 2 year stack in March and as I indicated even coming into the Q2, we continue to have a very consistent delivery in terms of how those numbers are there. And that speaks to us to say there really is some, I'll say COVID stickiness out there a sales in terms of change patterns and behavior that supports higher sales.
Understood. And Nathalie, can I just ask you a follow-up on the tax Is the reinstatement of a European holding company for the U? S. Business an option that you think is feasible?
I have to say that's one I'll have to look into. I don't have an opinion on that that I would want to share right now.
Understood. Thank you.
Our next question is from Ms. Victoria Petrova, Credit Suisse. Go ahead please. Your line is open.
Thank you very much for letting me to ask my questions and congratulations on strong results. My first Question is on the current inflationary trends on the cost side, both in commodity freight prices as well as fulfillment expenses. Does your current guidance already account for it? How you're dealing with that? Do you have flexibility around passing those cost to end customer boost in Europe and in the U.
S. And if there is any difference there? That's my question number 1. And I have 2 short small questions. 1 on meal kits.
I know that in Benelux You had meal kit offering from Albert Haynes. And are you continuing that? Are you investing in Do you have any strong view around that in the context of obviously very high total valuation of milk kit companies? And do you have a view and an overlap with on demand grocery deliveries, this new trend within 10, 15 minute grocery delivery In your markets of presence, are you addressing it anyhow? Do you have anything to comment on maybe around this topic?
Thank you very much.
Yes. Thank you very much. On the COGS and expenses and cost inflation, I mentioned earlier that these kind of phenomena are not new to us. I mean, as a retailer, You look at your COGS, you negotiate with your vendors what is a legitimate cost increase based on raw materials, Classic packaging and these type of things. And if those things are legitimate and clear then there's a good reason to pass it on and consumers will understand.
But we have a very strict model in place with economists, with a shoot cost model. We do those comparisons. And as we have also quite some percentage of our sales in private label, 30% in the U. S, 50% in the Benelux, We know very well what costs are doing for all those various components including energy and transportation. So it's our job to make sure that we don't take on board inflation which we do not understand.
It's also our duty to make sure that For consumers, the prices are staying as low as it can be and also protect our margins. So there is no difference there in how we normally would operate. And also with raw materials potentially going up, when we talk about grain and soy or energy, That is quarter by quarter I think we negotiate and that's why we are very close to that. Historically, a if you look at the gap between the CPI or PPI on the East Coast, those differences are not that big. And we also don't expect that they will be much bigger than we used to see them historically.
On demand grocery, the 10 minutes service like a few competitors have now in the marketplace. Of course, we follow that. We have Geared up quite a lot of modalities in our own online services. We were not that long ago, a couple of years ago only a delivery next day company. And in the meantime, we have same day, we have instant, we have click and collect, pick up curbside, we have still delivery growing quite fast both in the Benelux, but also in the U.
S. So yes, we are of course looking at everything what's happening to the marketplace, what consumers appreciate to pay for and how that is going on. And on the meal kits, which is a component of convenience, I would say, When I say that we are strategically better positioned this year in 2021, then Nathalie already mentioned the investments investments we made on supply chain, and we talked about online and capacity and growth. We talked about digital and front end. We talked about harmonization of all kind of applications In both Europe and the U.
S. Where we made big strides, but we also, of course, worked very hard on our assortment, because we see now with the unfortunately forced out of home transfer that consumers have sticky habits to cook more at home, They have rediscovered, let's say, cooking themselves. And that convenience is playing a role, fresh is playing a role, recipes, meal kits, halfway prepared meals and all these kind of things including meal kits. And we see a growing assortment the capability in our stores in the U. S.
And in Europe for having throughout the total bandwidth of convenience and fresh those type of solutions coming in. So yes, we grow also there. And what we also believe is that although restaurants hopefully are going to reopen again, The question is how long that will be for offices. And working from home will be more sticky also even if offices have reopened. And we see this in our own company where we will allow people to work more from home.
And working from home means also more consumption at home, lunches, breakfast and all these kind of things. So we think in home consumption will be sticky and we also believe that in home solutions for convenience in all those areas I just mentioned will also help us to grow our sales.
Thank you very much.
Pleasure.
Our next question is from Mr. Andrew Porteous of HSBC. Go ahead, sir. Your line is open.
Yes. Hi, team and congratulations on a a very encouraging Q1. 3 from my side. Can you just talk about the dynamics around click and collect? It was interesting you said that was one of the faster growing parts of your business.
Is that because there's just a lot more of the incremental capacity being added in Click and Collect? Is it something that consumers are choosing or is it something that you're driving through making the economics more attractive for consumers? Secondly, on the Stop and Shop refits, has there anything changed in your mind? Obviously, the industry has changed a a service over the past year or so. Is there anything changed in your mind about what the right format for Stop and Shop looks like?
Are you tweaking those refreshes versus what we saw So when we were out in the U. S. A couple of years ago. And then lastly, one around bol.com. I think probably related to an earlier question.
But given the scale of bol.com now, what's The synergy with the grocery business there and have you considered whether there would be any benefits from sort of splitting the economics of bol.com out more clearly in order to get more credit for them in your share price or of the market.
So if it's okay for you, then Natalie will talk about BAW a little bit more. I will try Click and Collect, it's an interesting phenomenon In the marketplace in itself, because there are of course a lot of gig providers of exactly click and collect who pick up orders as a third party for customers. And I think a number of retailers follow that trend. For us ourselves, As I mentioned before and I always try to emphasize this because it will be crucial strategically going forward, we operate our own click and collect services. We operate our own fulfillment.
It's our own data. It's our own front end. It's our own relationship with customers. And that's why we invested 2 years ago in our Prism software, which is operated and designed by Peapod Digital Labs, proprietary software To support the total fulfillment picking, but also the front end process, the total e commerce suite for the U. S.
Business. And yes, consumers followed trends on one hand, because part of the market is moving more to click and collect. But also for a number of consumers, click and collect is very, very convenient. I mean, if you can order your meals and your basket Click and collect and you just drive to stores, past the stores, in front of the entrance is a parking lot reserved for you And in 3 minutes, your groceries are in your trunk and you paid already upfront. For a lot of customers that is a very convenient compared to shopping themselves and more time efficient.
And some for some consumers, this is more convenient because they don't have to wait at home until an order is delivered. And driving from your office to your home, passing a store 3, 4, 5 minutes having your fresh, well packed, well isolated basket in your trunk is a very good service. And I think we do a very good job there in fulfillment. We adjusted a lot of stores to make sure that the grocery should be picked Before you came you come into us, our temperature controlled, so we made those investments well in time and we started 2 years ago. Stop and Shop, 60 stores by the end of this year.
And under the leadership of Gordon Reed, we did a very good analysis on the first two batches in Connecticut and Long Island, and we learned a lot there. And we're very happy what we see now with the pro form a Performance on those next remodelings. And we tweaked indeed. We tweaked On digital in the stores, on the fresh side, on the service deli departments, the counters for fresh and buffet. So we tweaked a lot there and we also found a smarter model how to enthuse customers center store and promotion and promotional levels.
So we did a good job there on understanding customers better what driving the sensitivity and pricing and volumes therefore and we're happy with the tweaking done so far. So We selected now the clusters for Stop and Shop. We have 400 stores in total. So it will be roughly a 5 years program, But we're happy with the progress so far. Bol dotcom, yes?
Yes. And on bol, let me just remind you again that we've seen a sequential improvement in that business a strong quarter from Q4 to Q1. It's gone developing very well. In terms of more disclosure, let me just repeat, I think the comments that are really important from our In addition to that strong growth, we also confirm that it is EBIT positive continuing to improve its profitability. We've talked about a return on capital being double digit and we are considering to disclose more, especially as we see it grow in size and it becomes more significant part of the European business.
But that's it for the time being. That's one where as I said, I think we need to a look there at how is the best way because it really is a business that there are different metrics that determine success. A sequential decline
in the quarter. But when we look at all of those conventional ones, we're very,
very pleased with how we're measuring performance there today.
That's very helpful. Thank you,
Our final question is from Mr. Sidu Blacasaba of May 1st. Go ahead please. Your line is open.
Yes. Thank you for taking my question. I have one actually a follow-up On your online operations in the U. S. And the first learnings from FreshDirect, could you tell us maybe the positive and negative surprises You've had so far and how the puzzle of online assets is being fixed, especially with Peapod.
And maybe how FreshDirect equation contributes to this productivity target of improving productivity online by 20% as the model is quite different from the click and collect you have on the other banners? Thank you
Yes, it's maybe a little bit early days to talk about the contribution of FreshDirect in productivity gains for the total network. But let me give you a little bit more color. We got approvals for the company to acquire on the 5th January, so it's still very young. 2 weeks ago, I visited FreshDirect and the team there, and I'm quite impressed by the professionalism, the pure play game, but also the high loyalty of the customer base and their strong position in Manhattan, the tri state New York and their initiatives to grow the business. Very robust quarter as well for FreshDirect.
And What you see is that if you look at the proposition they have on very high fulfillment performance levels on time complete orders and super high level of freshness In the proposition 60% of the total sales is fresh. I think it's a great addition to us where we can learn from. And on the other hand, of course, We would like to make sure that we also share group wide learnings with them as well when we talk about things like marketing and digital, e commerce and these type of areas. So good learning so far. The process of adopting FreshDirect as a family member is going well.
Impressed by the quality of the teams, impressed by the quality of the operation
Okay. With that last question, this concludes our conference call and webcast. Thank you for joining. Please take care and have a nice day.