Ladies and gentlemen, good morning and welcome to the Analyst Conference Call on the Third Quarter 2026 Results of Ahold Delhaize. Please note that this call is being webcast and recorded. During this call, Ahold Delhaize anticipates making projections and forward-looking statements. All statements other than statements of historical facts may be forward-looking statements. Forward-looking statements are subject to risks, uncertainties, and other factors that are difficult to predict and that may cause our actual results to differ materially from future results expressed or implied by such forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements.
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, Sharon. Good morning, and good morning, everyone. Welcome to our Q3 2026 results conference call. On today's call are Frans Muller, our President and CEO, and Jolanda Poots-Bijl, our CFO. Following a brief presentation, we will open the call for questions.
Our earnings release, presentation slides, and supporting disclosures are available in the investor section of our website, aholddelhaize.com. To give everyone an opportunity to participate, please initially limit yourselves to two questions. You are welcome to re-enter the queue afterwards. As usual, growth rates in today's prepared remarks are at constant exchange rates unless otherwise stated. And with that, over to you, Frans.
Thank you very much, JP, and good morning, everyone. Our third quarter performance gives us confidence in the strength of our business and the progress we are making with Growing Together. Despite a challenging customer environment, our brands delivered positive volume growth in both regions, gained market share across our key markets, and maintained healthy profitability while continuing to invest in the areas that matter most to customers. Behind these results are strong fundamentals, trusted local brands, a deep understanding of customers, growing omnichannel capabilities, and the scale and financial strength to keep investing. And perhaps most importantly, dedicated people who bring all of this to life every day.
Of course, we are not immune to the challenges around us. Household budgets remain under pressure, operating costs require careful management, and since the end of the quarter, we have faced significant cybersecurity incident. We take these challenges seriously and are addressing them with determination and discipline. But I would like to be equally clear about what has not changed at all. Our brands remain competitive, our strategy continues to deliver, and our confidence in the long-term opportunities for Ahold Delhaize is unchanged.
Before discussing the quarter, I want to address the cybersecurity incident in October and how our teams have responded. After detecting the issue at an early stage and in line with our protocols, we took certain systems offline to protect our data and IT environment and initiated an investigation, which remains ongoing. This affected our online capabilities in the Benelux and the U.S., as well as parts of our Benelux supply chain. bol in itself was not impacted. We apologize to our customers for the disruption and inconvenience and are grateful for their trust, loyalty, and understanding. As our brands welcome customers back, we are showing our appreciation through special promotions and small gestures.
I also want to recognize our colleagues who worked tirelessly to restore operations and serve our customers, supported by our partners, authorities, and industry peers. Cyber threats are an increasingly harsh reality of doing business today, and we deeply appreciate the cooperation and support we received. We can take real pride in how our people responded. Their commitment, collaboration, and determination in difficult circumstances reflect the very best of our organization. But pride in our response must sit alongside an eagerness to learn. We are taking the lessons seriously, strengthening our capabilities, and working to ensure we emerge even better prepared. The incident will affect our Q4 performance, and Jolanda will address the financial implications and updated outlook.
Let me turn to the underlying progress we made in the third quarter. Across our markets, our brands continue to demonstrate the value of understanding their customers and responding with relevance and agility. Four areas stand out: customer value, own brand, omnichannel growth, and the expansion of our market positions. First, customer value. When household budgets are stretched, people make more deliberate choices. They want affordability, but not at the expense of quality, health, or convenience. Our brands understand this and are responding through price investments, stronger own brand assortments, and increasingly more personalized loyalty propositions. In the U.S. alone, our brands delivered more than 4.3 billion personalized offers in this quarter.
Hannaford brought this value proposition together under the Save Now platform, reinforcing everyday low prices and clearer value communication. Stop & Shop introduced Dollar Deals, offering hundreds of selected products for just $1, while Giant Food launched new instant win promotions through its in-store savings stations. Across Europe, we see the same focus on understanding what matters to customers. Delhaize performed exceptionally well in Belgium, supported by compelling campaigns, including the introduction of Cravy, its new freshly prepared street food concept. Albert Heijn is strengthening its investment in price favorites, matching key value items to price levels of discounters. In Serbia, Maxi is winning back market share through own brand, attractive promotions, and an extensive range of price favorites.
Each approach is locally relevant, but the principle is shared. Own brand is increasingly central to those propositions, with group penetration increasing by 50 basis points year- to- date, demonstrating its appeal across customer segments, including higher income households. In the U.S., our brands introduced products ranging from Nature's Promise sourdough breads and Taste of Inspirations charcuterie meats to new fresh salads and lettuce mixes. In Europe, own brand already represents half of our food sales and is growing. Our joint sourcing initiatives allow us to combine scale with local customer understanding, bringing great products to more markets while supporting commercial excellence.
Albert in Czechia, for example, recently launched a major campaign around Perla coffee, already a successful own brand proposition in both the Netherlands and Belgium. Own brand is about more than affordability. It also gives us an important opportunity to help people live healthier lives. Our latest research amongst more than 8,000 consumers found that 92% want to eat healthier, yet only 40% believe that their diet is very healthy today. With 77 million customers shopping with our brands every week, we have both an opportunity and a responsibility to help close that gap. Ultimately, helping customers live better is an important part of building the trust and loyalty on which lasting growth depends.
Alongside value, convenience continues to shape how customers choose where and how to shop. Our omnichannel strategy connects physical stores, digital platforms, loyalty ecosystems, and fulfillment capabilities, allowing customers to engage with our brands in ways that work for them. Our omnichannel customers spend on average between 1.5 and 3x more than customers shopping exclusively in physical stores. We are adapting our digital capabilities to ensure our brands remain discoverable wherever customers choose to shop, while bringing new tools and services into the customer experience. At bol, for example, we recently introduced ShopHelp, a conversational AI-powered shopping assistant, helping customers find the right products faster and more easily.
We are also continuing to invest in the physical reach and density of our brands. In the U.S., Food Lion opened a new store in Q3 and remains on track to open 10 stores in total by year-end. The brand has launched omnichannel remodels across 92 stores in Greensboro, North Carolina, with preparations already underway for the next rounds of remodels in the Richmond and Roanoke markets. Stop & Shop is progressing towards exceeding its original target of 40 remodels this year.
In Europe, our complementary portfolio of Mega Image, Profi, and Shop&Go gives us a strong platform in Romania, a market of 20 million people, serving different shopping missions, locations, and price points. We have already opened 64 stores this year, with further expansion planned. In Belgium, Delhaize announced EUR 120 million investment in its logistics operations to support future growth and maintain high service levels for customers and affiliate partners in Belgium and Luxembourg.
While organic growth remains at the heart of Growing Together, disciplined acquisitions can accelerate our strategy where we see attractive opportunities to build on our existing capabilities and market positions. That is the rationale behind our recently announced agreement to acquire Tesco operations in Czechia and Slovakia, subject to customary closing conditions, including regulatory clearances. Following completion, integration, and the necessary portfolio optimization, the combined business with Albert is expected to become the leading grocery retailer in Czechia by market share, while establishing Ahold Delhaize as a significant player in Slovakia.
It is an exciting opportunity to bring our local retail expertise, scale, and disciplined capital allocation together in markets we know well, and we have a lot of experience and know-how with this type of project. More broadly, it illustrates the multiple ways we can create value through Growing Together, by strengthening existing businesses, expanding into attractive adjacencies, and investing where we believe we can make a meaningful difference.
Stepping back, I'm encouraged by what this quarter tells us about our business. Our brands are gaining share, customers continue to respond to the investments we are making, and we are building stronger positions for the future. Just as importantly, our people continue to demonstrate the commitment and entrepreneurial spirit that makes our business what it is. With Claire in the U.S. and Margot in Europe established in their regional leadership roles, and Cherie joining us in January, we have a strong leadership team to drive the next phase of Growing Together.
As we enter the final month of the year, our priorities are clear. Our brands are preparing compelling promotions and inspiring seasonal assortments to help customers enjoy the moments that matter with family and friends. We remain confident in our business, proud of our people, and focused on the long-term opportunities ahead. Our updated 2026 outlook reflects the impact of the cybersecurity incident, but also our commitment to the broader Growing Together ambitions, which remain unchanged. With that, over to you, Jolanda.
Thank you, Frans, and good morning to everyone. Our third quarter results give me confidence in the underlying strength of our business and in the progress that we are making in the execution of Growing Together, a strategy that is centered around our customers, aimed to drive growth to generate returns that we can invest in our value proposition, backed up by strong and continuing cost reductions.
I would highlight three things. First, the underlying health of our business is strong. The investments we are making in the customer value proposition result in market share gains. Second, we continue to demonstrate strong execution by combining our growth ambitions with solid margins. Third, our cash-generating capacity and our balance sheet remain important strengths. These are meaningful strengths, particularly in today's challenging environment.
As we discussed just after Q3, our business was disrupted by a cybersecurity incident. Our current estimate is that due to this incident, Q4 net sales will be impacted between EUR 200 million and EUR 250 million, and that underlying operating income will be impacted by EUR 75 million-EUR 100 million. The underlying operating income impact is based on many elements next to the regular sales flow-through. For example, it's shrink, extra hours worked to get supply running, promotional actions to welcome our customers back, and the negative impact on, for example, lost vendor allowances and retail media.
European sales, particularly in the Netherlands, were disproportionately affected. As a result, approximately 80% of the expected sales impact is in Europe and 20% is in the U.S. Since the Netherlands was able to mitigate part of the profit impact, the expected underlying operating income split is more balanced.
Next to the above, the direct incremental response and remediation costs are expected to have a marginal impact on full-year 2026 IFRS operating income. We have updated our full-year outlook accordingly, which I will come back to later. There is an important distinction between the pressures affecting near-term performance and the underlying earnings power and potential of our business. Our third quarter results give us confidence in the latter. Let me take you through the details.
Starting with group results. Net sales increased 1.9% to EUR 23.1 billion, including a positive 15 basis points impact from weather and calendar shifts. Underlying operating margin was 4.1%, down 10 basis points. A favorable discounting effect on insurance provisions at group level was offset by a modest decline in the U.S., partly reflecting the price investments we're making and the cycling of prior year non-recurring items.
Diluted underlying EPS increased 1% to EUR 0.69, supported by higher underlying operating profit and our share buyback program, partially offset by higher financial expenses. Overall, we have a solid quarter. We are delivering positive volumes, gaining market share, and maintaining healthy profitability, while we are continuing to invest in the future of the business. This balance remains central to how we manage the company.
On an IFRS basis, operating income was EUR 30 million higher than underlying operating income, which is primarily reflecting a pension settlement gain in the U.S. Slide 19 provides further detail on comparable sales, including adjustments for weather, calendar, and other notable items. These are particularly relevant in understanding the U.S. performance this quarter. In the U.S., net sales reached EUR 13.3 billion, with comparable sales growth, excluding gasoline, of 0.5%. The reported growth rate reflects several distinct factors.
Changes to SNAP eligibility reduced growth by approximately 70 basis points, pharmacy pricing changes under the Inflation Reduction Act by 60 basis points, the Cyclospora outbreak by 55 basis points, and egg price deflation by a further 25 basis points. Together, these represented a headwind of approximately 210 basis points, partly offset by a 20 basis point benefit from weather. These factors matter to assess the underlying competitiveness of our brands. We delivered positive volumes in the quarter and gained market share across most of our brands.
Looking ahead, we expect the Inflation Reduction Act headwind to remain broadly similar in Q4, while the impact from egg deflation should moderate. We do not anticipate further effects from Cyclospora, while SNAP might still create some quarterly variability. Our full-year expectation for SNAP remains unchanged at approximately 60- 80 basis points.
Turning to profitability, the U.S. underlying operating margin was 4.3%, down 30 basis points, primarily reflecting the cycling of prior year non-recurring items, price investments, higher utility, and indirect energy-related costs, partly offset by a favorable pharmacy mix. We continue to address these pressures through cost discipline and productivity while protecting our customer propositions.
One particularly encouraging area is online. U.S. online sales increased by 14.2%, marking the 10th consecutive quarter of double-digit growth, with penetration reaching approximately 10% and profitability improving step-by-step. Food Lion sustained online growth above 20%, while across the U.S., we welcomed nearly 400,000 new online customers. Online retention also remains strong, exceeding 75% quarter-on-quarter. These are attractive dynamics, strengthening customer engagement and supporting our omnichannel growth model. While several external factors weighed on reported results, the underlying competitive momentum in our U.S. business is encouraging.
Turning to Europe, net sales reached EUR 9.8 billion, with comparable sales growth of 2.1%, excluding a 10 basis point calendar impact. Our European brands delivered positive volume trends despite subdued consumer confidence, competitive pricing, and deflation in several markets. Underlying operating margin remained stable at 4%. Progress at Romanian synergies and labor productivity helped offset weaker performance in Serbia following the government's grocery pricing decree, alongside other higher indirect energy-related cost levels. Maintaining a stable margin in this environment reflects the discipline of our teams and the benefits of our portfolio.
European online sales increased by 2.1%, broadly maintaining the pace of the previous quarter. At bol, performance was affected by a supply chain incident at a warehousing partner and continued consumer pressure, leading to some down trading within the assortment. Nevertheless, we continue to hold strong online market positions, and our selective investments in future capabilities are yielding encouraging results. Overall, Europe's performance demonstrates the value of strong local brands, disciplined execution, and continued operational improvements.
Stepping back from the regional results, I want to spend a moment on productivity, because it is fundamental to the long-term economics of our business. Through Save for Our Customers, we are simplifying operations, improving efficiency, and leveraging our group capabilities. Technology, data, and AI are increasingly important enablers.
For example, Albert Heijn's mechanized home shopping centers have improved productivity by more than 20%, while initiatives at Albert Heijn and bol have increased output capacity by 10%. We are moving beyond the individual initiatives to scaling proven solutions across our entire business. This includes the new ADUSA distribution center in North Carolina and supply chain projects across Europe, creating capacity, improving efficiency, and supporting better service. These improvements are meaningful, but the broader financial logic matters even more, because for us, it's not simply about taking cost out, it's about creating the capacity to keep investing in our customers and in strengthening our competitive positions.
Turning to cash flow, we generated EUR 445 million of free cash flow in the quarter, bringing the year-to-date total to EUR 747 million. The year-on-year reduction primarily reflects working capital movements related to calendar and seasonal phasing, together with higher capital investments. As of September, we experienced a negative impact on our free cash flow performance as a result of the new payment regulations in Serbia, which has a full-year impact of approximately EUR 100 million.
While cash flow timing can vary throughout the year, our underlying cash generating capacity is a fundamental strength. In the first nine months, we repurchased EUR 844 million of shares under our 2026 program. Our approach remains one of balance, investing for future growth, maintaining financial flexibility, and delivering attractive shareholder returns.
Finally, let me walk you through our updated full-year outlook, which includes the cyber incident that I outlined earlier. We now anticipate an underlying operating margin of approaching 4%, with diluted underlying EPS at constant rates growing at a low single-digit rate. Taking account of the cyber incident and the new payment regulations in Serbia, we now expect free cash flow of around EUR 2.1 billion. Based on this updated outlook, we aim for mid-single-digit dividend per share growth in 2026, and we are confirming the continuation of our EUR 1 billion annual share buyback program in 2027.
This reflects our confidence in future earnings and cash generation, but equally the discipline and consistency with which we manage our business. Our recently announced agreement to acquire Tesco businesses in Czechia and Slovakia is another example of the opportunities we see to deploy capital in a disciplined way to strengthen our market positions and to support long-term growth. We are excited about the potential and the great people that will join our company and the opportunities this will create for the future. At the same time, we recognize that there is a natural desire to understand more about what comes next.
Until closing, however, both companies must remain focused on what matters most, running their respective businesses, serving customers, and delivering on their commitments. This naturally limits what we can share at this stage, but we look forward to sharing more once the transaction has closed.
As we enter the final months of the year, our focus is clear. We will complete our recovery from the cybersecurity incident, rebuild customer momentum, and execute strongly through the holiday season ahead of us. We look forward to that. Our brands are preparing the value, quality, and inspiration our customers look for at this important time of the year, helping families enjoy special moments, whatever their budget.
I also want to recognize our colleagues across the business. Their commitment through a demanding period has been remarkable, it is an important part of what makes our company a special one. We know the challenges we face, and we are addressing them. We have the financial capacity to keep investing, the discipline to navigate challenging conditions, and a strategy that continues to create opportunities for sustainable growth. That is where our focus remains. Thank you for joining us today. Sharon, 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, please press star one one to ask a question. Thank you. We will now go to our first question. One moment, please. The first question today comes from the line of Rob Joyce from BNP Paribas. Please go ahead.
Hi, good morning. Thanks for taking the questions. As the first one, could you give us an update on the market share changes you are seeing, maybe the local U.S. banner level? Finding it hard to square a kind of half percent growth with market share gains, so any color there would be great. The second one, I guess, I know it is early, but any potential impacts you might see from the blue wave overnight? Is there any potential easing of some of the pressures on that SNAP spend, for example, you could possibly see on the horizon? Thank you.
Thank you very much, Rob . Jolanda will come back to your question on the blue wave. I would like to share with you a little bit more about market shares and how we compete and win on the East Coast of the U.S. Jolanda already mentioned, and also in my own speech earlier, that we gained market share, and those are Nielsen numbers on the East Coast in the U.S. And we do this already for a pretty consistent time, and that is the market share gain across the whole East Coast. Sometimes it might help to explain a little bit more how we compete in those markets.
We have five great local brands who have varying between 14% and 18% share in the markets where they operate. And we also know that we have a number of big players, like for example, Walmart and Amazon, who are large, but we are large too. The second thing is that if you do some math on our 14%, 18%, you make some assessment on the size of grocery for Walmart and Amazon, for example, then still more than half of the market is there to gain from. That is the market where we compete with, that is the market we take share from.
Apart from that, we also at the same time compete head-on-head with Walmart in many of those markets. And you know our story about Food Lion in those southern East Coast markets, where Walmart is gaining share and we gain share, all Nielsen numbers. That is by definition not a zero-sum game, and that is also something I just would like to share once more with you. In 80% of the DMAs where we operate, we have a number one or two position. So we have strong market shares and also a strong quality of sales.
Apart from when we talk grocery, then grocery is not just grocery. Grocery is for us also a very strong fresh proposition. More than 30% of our sales is coming from fresh, and I think that is a big difference to a lot of players in the U.S., our fresh proposition in itself, creating not only health and opportunities, but also frequency, as we know. J olanda mentioned already a 14% online growth in the U.S. So also online game within 10% penetration is also moving there, and we have ambitions to move faster right away there as well.
Where would we take share from? Just to give you an example, we see more than 2,000- 3,000 independent retailers on the East Coast, which roughly have a market share of 20%. Most of those independent retailers are small retailers, small entrepreneurs, 2,000- 3,000, with 4,500 stores is our estimate. We invested heavily in the last years in modernization of the fleet, in digital, in online, in tech, and all these kind of areas. That is not so easy for the smaller entrepreneurs to follow. I think a further consolidation will take place.
Just for a reference for the Europeans on the call, the market on the East Coast in the U.S. is much less concentrated than, for example, markets in the U.K. or Germany or France, for that matter, or Canada, if you will. I think there's quite some opportunity to grow, and I think consolidation will get acceleration in the coming years to come, and we think that we can benefit from this.
On the question of the blue wave. Yes.
Blue wave, yeah.
The blue wave. We have been working in the U.S. with a local U.S. business for almost 150 years. We have worked under all sorts of governments and administrations. Of course, we do not interfere in politics. We monitor closely what will happen. For us, the most important element is stability and predictability. It is important for consumer confidence, but it is also important for business. Current guidance on SNAP is 60- 80 basis points impact for the full year.
Of course, if one out of eight Americans approximately is depending on the SNAP program, it would be of great help for consumers and consumer confidence if there would be an upside for them to help them through difficult times. Just like you, we are monitoring, and we will be able to navigate whatever comes next.
Okay. Thank you very much. Just quickly on Stop & Shop share, have we got any updates there in terms of that progress, sort of 1Q, 2Q, 3Q?
Yeah, I think Jolanda mentioned this already, but Stop & Shop, we have now the whole network well-invested in price. We are making another 40 remodelings in the total Stop & Shop network, so also there, our store fleet gets even more modern. We gained volume, and we gained market share at Stop & Shop in the brand, but those are Nielsen numbers.
Okay. Thank you.
Thank you. Your next question today comes from the line of Sreedhar Mahamkali from UBS. Please go ahead.
Hi. Good morning. Thanks for taking my questions. Just a very quick follow-up to Rob's question, and then a couple of questions, please. I think the market share, I think your slides, Jolanda, you talked through four of the five gained share. So, if Stop & Shop is one of those four, is it Hannaford that's behind or Giant? That will be helpful to understand.
Secondly, two questions, as I say. One, as things stand without any sort of political intervention and such, can you perhaps talk about how we should think about SNAP, IRA impacts, and also perhaps egg deflation into next year? I think one of your U.S. peers suggested potentially further headwinds from IRA, more drugs being added from 1st of January. It will be helpful to understand how we should be thinking about just the technical side of things.
Secondly, I think productivity, you talked about technology and AI, Jolanda. I am really interested in understanding if there is a message here. I mean, does that support your continued confidence in the EUR 1.25 billion run rate on, Save for Our Customers delivery, or somehow you are signaling there is a potential to step change that? Thank you.
Yeah, Sreedhar, thanks for your questions. Frans will tackle the tech and AI part. He is very digital, so best equipped to do so. Your first question, four out of five brands indeed are gaining share, and it was indeed Hannaford that lost share. What does not help Hannaford in that market share calculation is that they have the highest penetration of RX in our portfolio, so that is what did not help them. Also, they have a higher penetration than their competitors in that area.
SNAP for next year will have an impact, but it is getting lower. We monitor and we will guide, in fact, when we see each other again. But it will still have an impact, but lower. IRA, also an impact on next year, but also lower. I am not too worried about IRA, though, because it is offset at a profitability level. But both will continue, and we will, again, guide you appropriately in February. And tech and AI, Frans.
Yeah, tech and AI. Thanks, Sreedhar. And your Hannaford guess was pretty on the-
Good one.
spot. Yeah. Well-informed on the Nielsen numbers too. So, tech and AI, we invest this year EUR 2.7 billion, and a growing share of that EUR 2.7 billion is going into technology, mechanization, AI, and looking at productivity and these kind of areas. And it also means that it will help us to make our Save for Our Customers targets too, when we talk about cost savings and productivity. So, it is in-store, it is DCs.
And if you see the productivity, you saw that in the endless slide, the mechanization and productivity of our location in Barendrecht in Albert Heijn, this is helping us. So, it is a support for us, and at the moment, we have EUR 5 billion in four years at EUR 1.25 billion. And when we see more opportunities, then we will look at this. But we have a very clear AI strategy too, where we look at domains of AI. For example, domains are store operations, that is talent, but it is also merchandising and these kind of areas. I think we are getting grips on this. It is not the widespread use cases, but more focused on domains, and it also will help us to get even more competitive cost.
Besides the efficiency, we are also, of course, investing in the AI assistance, for example, at bol, but also in our stores, that hopefully drives revenue on the other side as well.
Yeah. But Sreedhar was a little bit more looking at Save for Our Customers.
Yeah.
I think it is a combination of both. It is not a double-sided sword, but, I do not know, because that sounds a little bit painful and lesser, but it comes in more areas in AI. I think we are sometimes thinking about AI as a potential threat in a way, but we also think that we can have good benefit out of this. And it is also in the consumer and customer-facing elements Jolanda just mentioned, and just think about loyalty, think about the AI assistance. They are really getting traction now.
Thank you both. If you two and JP aren't offended, maybe just one follow-up question to a comment you made, Frans, to Rob's answer on consolidation. Do you think it's an acceleration in the consolidation you envisage in the next, I don't know, two, three years period of time in the U.S.?
I don't take this as an insult at all, the remark, Sreedhar. I mean, I have the same crystal ball that you have. If you just look at the level of competition, if you look at the type of players in the markets where we operate, if you see where CPG companies give their support to companies who can increase the volume and therefore trade rates, if you see the investments we made and investments needed to attract customers on loyalty, on AI, on online, on store modernization, and all these kind of in-store facilities, those are huge costs. We see those costs, and those costs are not always easy to make for smaller and mid-sized entrepreneurs.
That's why I see, when I see that 20% of independents, that will be a difficult thing. We see now already in our own network that there are more parties coming to the table who would like to sell their business or would like to partner up with us. I think, therefore, yes, I see this happening, a further acceleration, Sreedhar.
Thank you.
Thank you. We will now go to the next question. The next question comes from the line of Xavier Le Mené from Bank of America Securities. Please go ahead.
Good morning. Thank you for taking my question. The first one would be just on the cyberattack. Should we expect at some point that you may get something from insurances to offset part of the pain that you're getting? Also linked to the cyber, all the impact you've got for Q4, does it include only what you have seen so far, or are there also some vouchers or other commercial helps that you're going to spend in the coming weeks that also are part of the earning cuts that you just announced? That's for the first question.
Second one would be on the M&A and the fact that you're expanding now in Central Europe. So, you bought two countries, or at least one new country, plus you're expanding in Czech Republic. Do you have further plan to expand in other region and potentially to have a broader scope in Central Europe, or is it something that is quite opportunistic and you've got no plan to expand further?
Thank you for your questions. I'll go into the cyber-related, then Frans will go into your questions around expansion. Yes, we do have an insurance, and the numbers I've shared are what we call above the line. We also have some below-the-line expenses that we expect to be one-on-one covered by insurances, and that's why we don't include them in the underlying operating income. The amounts I've mentioned is the estimate for the full quarter, so includes also costs to follow.
Yes, we do expect to also get part of that above-the-line expense back from insurance companies, but our experience is that that takes quite a bit of time, and it's not sure how much will come back from that. But that should be, at a certain point in time, an upside to our profit levels. For now, Q4, we are recovering from the cyber incident. All our online websites, et cetera, are on track, and we are totally prepared for the festive season because that is the most important driver for our Q4 results. As I said, we look forward to that.
Jolanda has been super transparent as always. If you shut off a system, then there are a lot of things you have to redirect to be complete in your recovery. For customers, we are recovered. For customers in stores and online, we have the full functionality back. I share the enthusiasm Jolanda said already that we will have a great year-end and festive season.
On strategy and M&A, Xavier, we have been always very clear. It must be in line with strategy. It must be in line with our Growing Together strategy, which is an organic strategy, but also the personality of acquisitions must be in line with our strategy. It must be something which is bringing synergies and accretive. It must be a doable integration process. We also are even more excited when it also brings capabilities. We are very happy also to work together with our Tesco colleagues in the Czech Republic and Slovakia to make that capability win also possible there.
With Tesco, the Czech Republic, we will be the number one brand in the Czech Republic. With the acquisition of Slovakia, we will be a very important player in the new country of Slovakia, and we are excited about that country too. You heard already earlier, our acquisition of Profi in Romania. We trust that region, we believe that region, and we think that the region is a region of growth. We also believe that the markets are not fully served. So there is an opportunity for our strong brands and our capabilities there to bring something new to customers in all the areas you know from us.
Yes, we see this as a strong region, and when there might be new opportunities there, then of course, we will keep you posted.
Thank you.
Thank you. Your next question today comes from the line of Robert Jan Vos from ABN AMRO – ODDO BHF . Please go ahead.
Yes, hi. Thank you. Good morning all. I have a couple of questions as well. Can you update us on the cyber hack that you revealed earlier this week? Is that contained? Related to this, do you expect any extra CapEx for IT, maybe in Q4 or for next year?
My second question, there is a lot of moving parts for comparable growth in the U.S., as Jolanda explained, and I appreciate that you are gaining share in most brands. Yet, ADUSA comparable sales growth decelerated for the fifth quarter in a row, to 0.5% in Q3. Do you assume that growth has now reached trough levels in the U.S. when looking at the consumer environment? Squeeze in one small question, is the outlook for the Tesco completion, the Tesco assets completion for Q4, is that normal timeline? It seems a bit long, one year to close such a deal. Thank you.
Robert Jan, [Non-English content] Thanks for the questions. The cooler hack, I didn't know that was the terminology. Entrepreneurs in our Belgium network got that ring from their alarming systems at 3:00 in the morning, and very sad to see that they had to destroy quite some foodstuffs and stock levels. But by the end of the day, we were up and running again. Yes, it has been contained. For entrepreneurs, of course, this is cost, and we hate to see wasted food elements there. But for ourselves, this hack has been immaterial as such to our results.
What happened is that, and you might have all followed the news, is that we have equipment in stores which are regulators for cooler or freezer systems. The systems, of course, owned by our entrepreneurs and our affiliates, it's not our property. Those systems were compromised. Learning from the France cooler issue, we informed our partners and entrepreneurs in the total network what they need to do there to try to avoid that. The same the suppliers did, both Danfoss and Copeland.
So entrepreneurs were informed about this. Those who make those changes were also protected, by the way. But sometimes these kind of things are not so easy for smaller entrepreneurs who are not so in the digital space itself. I think the learning there is that we also can step up our support there, but we supported them with all the information they needed. There's no further element there which we have to call out, and there's also, apart from this incident, nothing anymore visible in our total network.
Okay. Robert Jan, your question around U.S. comps, 0.5%. As I just shared in the call, there's lots of elements to look into if you want to assess that number. If we look into the elements, RX, as I stated, I'm not too worried by that because it impacts sales, but it's compensated bottom line. We expect RX to also have an impact, or IRA, whatever we call it, for next year.
At deflation, important component, I don't expect with my current knowledge that to be an impact next year. Cyclospora, that incident has passed, don't expect that to have an impact going forward. SNAP, which had a massive impact this year, it will, we think, with the knowledge we have at this point in time, impact 2027 as well, but at a lower level.
If you ask me, it has that bottomed out. I couldn't say that because I can't predict the markets. What for me is important looking at our business is, do we outperform? That for me is the point that matters. If I then look at volumes, which I prefer to look at, volumes were down, according to Nielsen, in Q3 with -3.9% in the U.S. We had positive volumes. I think we can conclude we're outperforming the markets as they are, and we envision to continue doing so because that's what our whole strategy was built on. It was built on growth beyond market levels, whatever the markets turn out to be.
Your second question on the Tesco acquisition, is it a normal timeline? Yes, it is. In the countries we're looking at to go through antitrust regulations, this is a normal timeline. Yes, it feels long. I share that with you, but it is nothing that we can change.
That is very helpful. Thank you.
Thank you. Your next question today comes from the line of Manjari Dhar from RBC. Please go ahead.
Good morning. Thank you for taking my questions. I have two as well, if I may. My first was on CapEx spend. Are you guys expecting that there might need to be a step-up in cybersecurity spend going forward, given the incidents you have seen? Secondly, I wonder if you could give us an update on Serbia, how you are thinking about recovery and timeline there. Thank you.
Thank you for your questions. CapEx is already at an elevated level in our company, and within that CapEx envelope, the spend on our IT is increasing. Approximately one-third of our CapEx spend is on IT, and that is both on the infrastructure and backend as on the front end. I do not expect peaks from the current events in our CapEx envelope.
Yep. 3% of our sales, our CapEx, which is quite high compared with industries. But we believe in a well-invested company and growing share of technology, like Jolanda just mentioned. Not only to protect ourselves, but also get more consumer-facing strength in our markets where we operate.
On Serbia, thank you very much for the question. It is not always coming on the table what we have-
Love it.
We have a warm heart for Serbia. We have operating in Serbia, the Maxi brand, where we are the market leader in that country. I think you followed us a little bit on with the government decrees and the various elements. I think at the moment, we are restoring our profitability. We are getting back our sales numbers. We hope that with the election results, that we get also more calmness in the country as well. We have to see what the plans are of the new incoming government will be.
We are feeling confident about the position where we are. The teams do an excellent job there. But what we also mentioned before, we are now under European legislation there for the UTP legislation, for example. We are very confident in that country, very happy with our leadership there, and we see that the business is getting healthier and restoring.
That is very clear. Thank you.
Thank you. Your next question today comes from the line of Izabel Dobreva from Morgan Stanley. Please go ahead. Izabel, your line is open. Izabel, are you on mute?
Did we lose Izabel?
There's no response off her line. Are you happy for me to move on to the next question?
Yes, sure. Move on. Move on.
Thank you.
We'll catch up with Izabel later.
Thank you. Your next question comes from the line of Fernand De Boer from Degroof Petercam. Please go ahead.
Yes, good morning. Fernand De Boer from Degroof Petercam. Couple of my side. First question is on the acquisition in Czech Republic, Slovakia. There is also some hypermarket business involved, and historically, you stepped away from hypermarkets because it was not really your game, more looking at the convenience of shoppers. How should we view on that one going forward? That's the first question.
Then the second one, you didn't mention anything on the market share of Albert Heijn in the Netherlands. I assume that is then flat. Could you then also say, because there were some press articles that in the first week of the disruption, Albert Heijn lost some 25% market share, and could you now indicate how much they are faring at this moment? How much have been recovered?
Thank you very much, Fernand, on the questions on the Czech Republic and Slovakia. I understand your question because with the Albert brand after the SPAR acquisition, we did a lot of good work to modernize stores, but also to resize stores. So, with the Czech Republic and the Albert team, with Jesper, we have a great experience there in right-sizing those stores. That will be also most likely a task for the Czech Republic and Slovakia. We talked about it in the introduction.
The share of large hypermarkets is in both Slovakia and Czechia only 30% of the sales. That is understandable and doable. Furthermore, the other elements are the compact hypers, the supermarkets, and the convenience stores. So, it's a broader mix than you might think. It's 30% sales hypermarkets, and we have a good experience in the Czech Republic how to deal with this, and we do this in a careful way to make sure that we don't lose customers. I think we also get there great help from our Tesco colleagues.
Fernand , on your question around market share over time, market share was flat, and we are almost back to normal where we are today from a market share and customer perspective for all the time.
Okay. Thank you very much.
Thank you. Your next question
No. Go ahead, Sharon.
Sorry. Your next question comes from the line of François Digard from Kepler Cheuvreux. François , your line is open. Due to no response, I will move on to the next question.
Hello. Hello.
Your next question comes from the line of Maxime Stranart from ING Bank.
Hi. Good morning. Hope you can hear me well. Two questions on my front. First of all, looking at free cash flow guidance, you cut it by EUR 200 million. I understand, Jolanda, that EUR 100 million basically is the cyberattack. The other EUR 100 million is in Serbia. Any indication you can give for 2027 already? The second question would be on volume growth in the U.S. Understand the point, but looking at the SNAP impact, I am just trying to understand if that volume growth was including or excluding the SNAP impact. That would be all for me. Thank you.
Volume growth. Thanks for the question. Volume growth. And we could hear you loud and clear, by the way. Volume growth was including SNAP in the U.S. Yeah.
On the free cash flow question, your assumption is indeed correct. The EUR 2.1 billion includes EUR 200 million impact, which is 50/50 Serbia and the cyber impact. 2027 guidance, we cannot give, but you can count on our ability of strong cash flow generation going forward.
Let me come back to you in February for the guidance.
Of course we will. Of course we will.
Thank you. We will now go to our next question. The next question comes from the line of François Digard from Kepler Cheuvreux. Please go ahead.
Good morning. Thank you. I hope this time you hear me. On the acquisition, could you elaborate on synergies you expect with this acquisition? On what kind of organic growth are you expecting from these countries that so far have not been particularly dynamic, organically speaking? A second question, if I may. What are your views on DoorDash-Instacart operation? What do the combining entities represent of your online sales, and what kind of dependencies you can fear from them? Thank you.
You start with the DoorDash-Instacart?
Yeah, I can. Thanks for the question. I understand also with the announcement of DoorDash planning to acquire Instacart, I understand the question. We have in the U.S. a very healthy online business growing 14%, and we have more ambitions to grow faster even. Roughly 45% of the total online sales is coming through platforms. That is not only Instacart and DoorDash, who both together have the lion's share, by the way, but also Uber, which is growing at the same time.
We have a very good relationship with all three as partners, so we also expect that that will be in a good and solid partnership going forward. Let's see what the agreements will be. I heard that somewhere the closing is expected late 2027, early 2028. I think we have to wait for that. Until that moment, we're enjoying the partnership and we're enjoying the growth.
On your question, François, on the synergies on the Tesco businesses, we expect around EUR 100 million of synergies to be delivered through that combination.
Run rate.
Yeah, run rate synergies, yes.
Yeah. Run rate synergies, yeah.
Could you elaborate on, because that figure, we get it, but in terms of sales on central cost, where do they come from, and what kind of underlying organic growth do you expect from these countries that have not been that dynamic so far?
I understand the desire. As I stated earlier in the call, I would have the same questions if I were you. But we need to focus for the next quite a long period, as we shared, next 12 months, on running the separate businesses, delivering great value to our customers. When the transaction is approved and closed, we will come back with more detail to guide you. But we cannot do that at this point in time.
Okay. Thank you. Sorry.
Thank you. We will now take our final question for today. The final question comes from the line of Izabel Dobreva from Morgan Stanley. Please go ahead.
Hello. Good morning. Thank you for taking my questions. My first question is on your U.S. grocery market share. You talked about the scope to gain share from the unlisted tail. I was wondering, could you comment on how you balance that opportunity to continue gaining share from the unlisted players with the need to maintain competitive price positioning versus the listed group, particularly over the long term? Do you think the two need to be in balance, or are you happy to continue gaining share from the unlisted group, even if that means that the price gaps versus some of the listed players could potentially worsen? That was my first question.
On the cyber hack, I had a quick follow-up. In terms of the impacts that you have guided to, are you expecting these to be largely one-off type of impacts, or is there any risk that they could spill over into next year in the sense that you may need to do perhaps more marketing or more promotions in order to reactivate the customers and re-accelerate the volumes?
Thank you, Izabel. Happy that you found us.
Or that we found you.
Or that we found you, yeah. That we came together in the call. Jolanda will come back to cyber, the questions there, the follow-up. I will say a few things about your question on competition and market share and winning in those markets. We do not make a difference between listed and unlisted companies. I understand what you say, but what we look at is how we can gain share with our relative market share in the markets where we operate, and that combined with brand strength. That is a secret sauce of our five brands. That means that our competition is everywhere in all kind of different categories.
If you look at all the brands, they have a number of competitors in their geographies they compare with on pricing, on proposition, on customer value proposition. In the U.S., we have great locations, but around those locations, we see competition being very different in the south, the north, the mid-Atlantic, and so on. So, it is very local. Wherever customers buy tomatoes when they do not buy with us, that is for us competition, and that is at the same time an opportunity to win. For all those competitors, we have specific pricing strategies, which we monitor very carefully with our systems. We follow the Nielsen numbers also very precisely, and also Nielsen there, and a lot of competitors on.
What I mentioned earlier is that we have also a set of independent players in the U.S., independent entrepreneurs, and we see there that there is an opportunity there for the size and scale, which is so relevant in our business to make the right investments, where we see opportunities to gain share. Jolanda, cyber.
Yes. Thank you, Izabel, for the question. The numbers that we shared to update our outlook are indeed one-off costs. We already included some marketing and promotional spend that is required to, A, thank our customers for their loyalty, but also to welcome them back to our stores or online. So, going forward, it does not fundamentally change our capital allocation strategy. As I indicated, IT in that spend, which is substantial, is already growing. We continue on that track, both front end with investing in AI, shopping agents, and everything that helps our customer, but also backend in our infra and protecting our infrastructure.
Okay. Thank you very much. Perhaps if I have time.
Thank you.
For one last question, as I am the last one, I think. I just had a question on.
No, no, go ahead, Izabel.
I had a question on the M&A, and I do not know if you can comment on this stage or not, but I was curious, when you think about the scope for synergy extraction, should we think about those primarily coming out of the Czech assets, or do you think there is also scope for some synergies from the Slovakian assets through kind of cross-group purchasing agreements?
Although, Izabel, we will not disclose any details, as I said, but I can share that we see synergies in both countries, because we even see synergies on a European level. Because although we have great local brands, we use the scale behind those brands to use our leverage, whether that is in sourcing or in other group setup capabilities. So, it has impact on the European level from a synergy perspective, and on both countries as well.
That is where we also installed a European sourcing organization, for example.
Yes.
Which is sourcing across all the countries, both in the western part and the central European part of the business. That is for own brands, but it is also for national brands. You have heard earlier, Izabel, about Coopernic and Eurelec. Those also play with us as well in the total network. So, it is more a European view we have than an in-country view. But also in-country, we will go on to enjoy synergies in both countries.
Thank you very much.
Thank you. That was our final question for today. I will now hand the call back to JP for closing remarks.
Yes, thank you, Sharon. For those who couldn't ask a question today, I am happy to reach out to the IR team. We are available for the rest of the day, and look forward to seeing you all at the various conferences and roadshows over the next months.
Yeah, enjoy a great year-end, JP , for everybody with family and friends. If you celebrate Diwali, for example, or Hanukkah, or Christmas, or New Year, or Thanksgiving, or Black Friday, we are there for you, and our stores and people are up and running to the best service of our customers. Happy holidays to come.
We welcome you in our stores, and thanks for being here.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.