Q2 2025 Ahold Delhaize Earnings Call
Frans Muller: Creating vibrant omnichannel customer experiences to strengthen loyalty, sharpening our competitiveness to drive brand strength, and securing our strong relative market positions. As you know, we are backing this up with several investment commitments, including a $1 billion price investment in the U.S. over the coming four years, own-brand assortment expansion, and digital personalization programs, just to name a few. All our U.S. brands have now launched price investments while also strategically leveraging the strength of our own-brand portfolio. An example of this is Hannaford, and that's in the Northeast. In May, the brand launched a strategic price investment across all our stores in Massachusetts, lowering prices on approximately 2,500 center store own-brand products. The initiative was bolstered by a targeted omnichannel marketing campaign and leveraged the strength of the Hannaford My Rewards local loyalty program.
Strengthen loyalty.
Sharpening, our competitive business to drive brand strength and securing our strong relative market positions.
As you know we're backing this up with several investment commitments.
<unk>, a $1 billion price investments in the U S over the coming four years AUM, Brent assortment expansion and digital personalization programs just to name a few.
All our U S brands have now launched price investments, while also strategically leveraging the strength of our own brand portfolio.
An example of this is hanna effort and Thats in the northeast in May the brand launched strategic price investment across all our stores in Massachusetts lowering prices on approximately $2 5000 Center store owned brand products.
The initiative was bolstered by a targeted omnichannel marketing campaign and leverage the strength of the Hannaford My rewards local loyalty program.
Frans Muller: The investment is showing promising results, with center store own-brand unit sales outpacing the rest of the store. As a key differentiator, own-brand assortments are products that customers can only get in our stores. In our weekly customer data, we also know the power of a well-executed own-brand product has in driving customer loyalty. While we already offer thousands of own-brand products in both regions, what also matters is ensuring we continuously innovate and that our own-brand products really stand out on shelves and in our marketing for the quality and value they have been designed for. So far this year in the U.S., we have introduced 300 new own-brand products. In Europe, we've added 170 new products for joint sourcing, including 100 products in the price favorite range. All our brands have seen year-over-year growth in own-brand penetration.
The investment is showing promising results with center store owned brand unit sales outpacing the rest of the store.
As a key differentiator AUM, Brent Assortments are products that customers can only get in our stores and in our weekly customer data. We also know the power of a well executed owned brand product S in driving customer loyalty.
While we already offer thousands of own brand product in both regions. What also matters is ensuring we continuously innovate.
And that our own brand products early stand out on shelves and in our marketing for the quality and value. They have been designed for.
So far this year in the U S. We have introduced 300, new own brand products and in Europe with edit 170, new products for joint sourcing, including 100 products in the price favorites rich.
All our brands have seen year over year growth in owned brand penetration.
Frans Muller: In both regions, we are seeing own-brand sales growth outpace the rest of the store in both dollars or euros and units. Moving to my next area of focus, I would like to start by acknowledging a key milestone that our brands already achieved during the first half of the year. On a fully allocated basis, we have reached e-commerce profitability for the total company. This underscores the strength and scalability of our omnichannel model, which is a key long term in driving market share growth at a pace faster than the market. Our improved online profitability has been driven by several key factors, including our orientation towards less asset-intense same-day delivery models, such as click and collect and third-party partnerships, increasing fulfillment capacity, automating operations, and leveraging retail media propositions. More and more, customers are finding value in the convenience of our brand's omnichannel offerings.
And in both regions. We are seeing owned brand sales growth outpaced the rest of the store in both dollars or euros and units.
Moving to my next area of focus I would like to start by acknowledging a key milestone at our branch already achieved during the first half of the year.
On a fully allocated basis, we have reached e-commerce profitability for the total company.
And this underscores the strength and scalability of our omni channel model, which is a key long term and driving market share growth at a pace faster than the market.
Our improved online profitability has been driven by several key factors, including our orientation towards less asset intensive same day delivery models, such as click and collect and third party partnerships.
Increasing fulfillment capacity automating operations and leveraging retail media propositions.
More and more customers are finding value in the convenience of our brands Omnichannel offerings.
Frans Muller: For the fifth consecutive quarter, our online grocery sales grew at double-digit levels. This quarter, Food Lion completed its transition to Prism, our in-house developed and proprietary digital and e-commerce platform. Prism enables faster, more tailored online shopping, helping customers easily find their favorite products. It also allows customers to activate digital coupons, reorder quickly, and choose delivery or pickup with ease. Shortly, we will extend the platform to Hannaford as well, which completes the rolloff of the technology to all the Ahold Delhaize USA brands. In Belgium, Delhaize is stepping up their e-commerce ambitions. During the quarter, they opened a new distribution center in Vorst, which doubles their e-commerce capacity. At the same time, they are taking steps to provide an even smoother customer experience by eliminating the fee to use the in-store pickup service.
And for the fifth consecutive quarter, our online grocery sales grew at double digit levels.
This quarter Footlights completed its transition to prison.
Our in house developed and proprietary digital and E Commerce platform.
Prison enables faster more tailored online shopping helping customers easily find their favorite products.
And it also it also allows customers to activate digital coupons reorder quickly and to delivery delivery or pickup with ease.
Shortly we will extend the platform to Hana front, as well, which completes the roll off of the technology to all the AG USA brands.
In Belgium, the less is stepping up to ecommerce ambitions during the quarter. They opened a new distribution center enforced, which double stack e-commerce capacity and at the same time. They are taking steps to provide an even smoother customer experience by eliminating the fee to use to in store pickup surface.
Frans Muller: This makes the service accessible to as many people as possible. It is not only existing customers who are drawn to the benefits of our omnichannel offerings. At Delhaize, half of the new online customers come from outside its network, meaning people with no prior Delhaize experience discovering the brand through home delivery or in-store pickup. In the U.S., customers in our DoorDash channel grew 300% over the last year, with half of that growth coming from customers that had not shopped online with any of our brands before. With e-commerce market share expansion in both regions, our store omnichannel proposition will continue to be a differentiator for our brands as we look to densify and grow our markets. Lastly, let me spend a little time on how our brands are driving operational excellence and delivering cost savings across our operations to reinvest in growth.
This makes this service accessible to as many people as possible.
It's not only existing customers, who are drawn to the benefits of our omnichannel offerings at the last half of the new online customers come from outside its network, meaning people with no pride of less experience discovering the brand through home delivery or in store pickup.
In the U S customers in our door Dash channel grew 300% over the last year with half of that growth coming from customers that had not shopped online with any of our brands before.
With e-commerce market share expansion in both regions our store Omnichannel proposition will continue to be a differentiator for our brands as we look to densify and grow our markets.
Lastly, let me spend a little time on how our brands are driving operational excellence and delivering cost savings across our operations to reinvest in growth.
Frans Muller: Starting with Stop & Shop, it has been one year since we announced decisive and deliberate actions to ensure a stable and thriving future for the brand. Since the announcement, we have closed 32 underperforming stores, started price investments with regularly recalibrating based on customer response, continued store remodels focusing on the more efficient use of capital and a broader store reach, improved store execution and on-shelf availability, and deployed communication tactics to maximize customer awareness and emphasize own brands. We are encouraged by customers' response to the initiatives which we have implemented so far. Where we have made investments, we are attracting new customers, seeing increased volumes, and seeing an improved net promoter score. While we are celebrating the wins, we continue to focus on executing the plan, driving sales, and finding sustainable and substantial efficiencies.
Starting with stop <unk> shop.
It's been one year since we announced decisive and deliberate actions to ensure a stable and driving future for the brand and since the announcement, we have closed 32 underperforming stores.
With price investments would regularly recalibrating based on customer response.
<unk> store remodels, focusing on a more efficient use of capital and the broader store reach improved store execution and on shelf availability and deploy communication tactics to maximize customer awareness and emphasize owned brands.
We are encouraged by customer response to the initiatives, which we have implant implemented so far and where we have made investments we are attracting new customers seeing increased volumes and seeing an improved net promoter score.
While we are celebrating the wins, we continue to focus on executing the plan driving sales and finding sustainable and substantial efficiencies.
Frans Muller: This includes a strong focus on supply chain optimization, as well as maximizing promotional effectiveness. In the second half of the year, we will expand our price investments to additional markets, further optimize our assortment, and continue our store remodels. We are also making good progress with the integration of Profi, the business in Romania, which will significantly contribute to our revenue growth ambitions in Europe and strengthen our market position within Romania. Work is progressing on the back end to fully integrate Profi into both our established footprint in Romania and the broader Central and Southeastern European region. Within Romania, Mega Image and Profi are exchanging best practices. This enables both brands to learn from each other's operational strength and accelerate collective growth while maintaining their distinct identities and commercial focus.
This includes a strong focus on supply chain optimization as well as maximizing promotional effectiveness.
In the second half of the year, we will expand to our price investments to additional markets further optimize our assortment and continue our store remodels.
We're also making good progress with the integration of Profi the business in Romania, which were significant contributors to our revenue growth ambitions in Europe, and strengthen our market position within Romania.
Work is progressing on the back on the backend to fully integrate profi into both our established footprint in Romania, and the broader central and South Eastern European region.
We didnt, Romania, Mega Marsh and Profi are exchanging best practices and this enables both brands to learn from each other operational strength and accelerated collective growth, while maintaining their distinct identities and commercial focus.
Frans Muller: While integration work continues, our local Profi teams remain committed to their local mission, serving both urban and rural communities through a diverse portfolio of store formats that cater to the varied shopping needs of customers. So far this year, Profi has opened over 20 new locations, and the brand is on track to open 100 by the end of the year. They continue to set new record highs for the number of weekly visitors and weekly sales. More broad-based, we are also well on track to hit our goals for Safe for Our Customer if both our regions continue to work on leveraging our scale and synergy potential. That completes my review of our performance.
While integration work continues our local profit teams remain committed to the local emission.
Surfing, both urban and rural communities through a diverse portfolio of store formats that cater to the varied shopping needs of customers.
So far this year.
<unk> opened over 20, new locations and the brand is on track to open 100 by the end of the year and they continue to set new record highs for number of weekly visitors and weekly sales.
Yeah.
More broad based we're also well on track to hit our goals for safety for our customer if both our regions continued to work on leveraging our scale and synergy potential.
So that completes my review of our performance.
Frans Muller: With our strong culture, known for its agility, consistency, ability to drive transformative change, and the commitment to sustainability, we are well prepared to navigate the complexities of the current business environment and position the company to drive brand strength and market share growth in the periods to come. Now over to you, Jolanda, to talk more about the financials.
With our strong culture known for its agility consistency ability to drive transformative change and the commitment to sustainability, we are well prepared to navigate the complexities of the current business environment and position the company to drive brand strength and market share growth in the <unk>.
<unk> to come.
Now over to you Yolanda to talk more about the financials. Thank you, France and good morning to everyone.
Jolanda Poots-Bijl: Thank you, Frans, and good morning to everyone. While the environment we operate in remains dynamic, our growing together strategy keeps us focused. We are executing well towards our long-term ambitions. Elevating the customer value proposition is at the heart of our strategy and a fundamental driver of the investments that we are making. We know that many customers continue to feel pressure on their household budgets. That is why these investments are not just strategic; they are also essential to delivering real value for our customers every day. The good news is we see the combination of all these initiatives is paying off. We delivered strong sales growth and positive volumes in both the U.S. and in Europe. While investing consistently in our brands, at the same time, our teams have maintained a relentless focus on cost discipline and driving operational efficiency.
While the environment. We operate in remains dynamic are going to get our strategy keeps us focused and we are executing well towards our long term ambitions.
Elevating the customer value proposition is at the heart of our strategy and a fundamental driver of the investments that we're making.
We know that many customers continue to feel pressure on their household budgets.
That's why that's why these investments are not just strategic they are also essential to delivering real value for our customers every day.
The good news is we see a combination we see the combination of all these initiatives is paying off we delivered strong sales growth and positive volumes in both the U S and in Europe.
Investing consistently in our brands at the same time, our teams have maintained a relentless focus on cost discipline and driving operational efficiency.
Jolanda Poots-Bijl: As a result, we are able to balance strategic price investments in the U.S., as well as the impact of the first-year integration of Profi, to maintain healthy and stable underlying operating margins. Let us have a look at the key underlying results for the quarter, as shown on slide 16. Net sales grew 6.5% to €23.1 billion. The closure of Stop & Shop stores and the cessation of tobacco sales in the Netherlands and Belgium negatively impacted net sales growth by 1.2 percentage points. The underlying operating margin was 4%. Strong performance in the Benelux was offset by the first-time consolidation of Profi and the planned strategic price investments in the U.S. Diluted underlying earnings per share was €0.65, up 0.7% at actual rates.
And as a result, we were able to balance strategic price investments in the U S as well as the impact of the first year integration of Profi to maintain healthy and stable underlying operating margins.
Let's have a look at the key underlying results for the quarter as shown on slide 16.
Net sales grew six 5% to $23 1 billion Euro.
The closure of stop and shop stores and the cessation of tobacco sales in the Netherlands, and Belgium negatively impacted net sales growth by one two percentage points.
Underlying operating margin was 4% strong performance in the Benelux was offset by the first time consolidation of trophy and the planned strategic price investments in the U S.
Diluted underlying earnings per share was <unk> 65, euro cents up 0.7% at actual rates.
Jolanda Poots-Bijl: This was primarily driven by higher underlying operating profit, the impact from the share buyback program, and lower income taxes, partially offset by higher financial expenses and unfavorable foreign exchange rates. Slide 17 shows our results on an IFRS-reported basis for Q2, which were €56 million lower than our underlying results, primarily due to impairment charges on operating stores in the U.S. and restructuring costs related to the integration of Profi. Q2 comparable sales growth was 4.0%, which includes a positive net impact of 0.8 percentage points from calendar shifts and a negative impact of 0.6 percentage points from the end of tobacco sales in the Netherlands and Belgium. U.S. comparable sales growth shows a positive net impact from calendar shifts of 0.9 percentage points. In Europe, there was around a 0.9 percentage point negative net impact from tobacco and calendar. Now looking at the regional performance in more detail.
Was primarily driven by higher underlying operating profit impact from the share buyback program and lower income taxes, partially offset by higher financial expenses and unfavorable foreign exchange rates.
Slide 17 shows our results on an <unk> reported basis for Q2.
56 million euros lower than our underlying results, primarily due to impairment charges on operating stores in the U S and restructuring costs related to the integration of Delphi.
Q2 comparable sales growth was four zero percent, which includes a positive net impact of 0.8 percentage points from calendar shifts and a negative impact of <unk> six percentage points from the end of tobacco sales in the Netherlands and Belgium.
U S comparable sales growth shows a positive net impact from calendar shifts of 0.9 percentage points in Europe. There was around 809 percentage points negative net impact from tobacco and Canada.
Now looking at the regional performance in more detail.
Jolanda Poots-Bijl: U.S. net sales were €13.2 billion. Comparable sales, excluding gas, increased 2.6%, excluding calendar impact, reflecting a stable comparable sales environment and positive volumes during the second quarter. In addition to the positive impact from calendar, net sales were negatively impacted by the following: around 110 basis points from the impact of Stop & Shop closures, and around 40 basis points from a decline in gasoline sales. Online sales growth of 16.4% was a key highlight for the quarter. We continue to see strong customer response to our DoorDash partnership, with growth in our marketplace channel up over 30%. Underlying operating margin in the U.S. was 4.4%, down 30 basis points from the prior year due to the price investments and a change in sales mix from online and pharmacy sales.
U S. Net sales were $13 2 billion euro comparable sales excluding gas increased two 6%.
Excluding calendar impact, reflecting a stable comparable sales environment and positive volumes during the second quarter.
In addition to the positive impact from calendar net sales were negatively impacted by the following around 110 basis points from the impact of stop and shop closures stop and shop closures and around 40 basis points from a decline in gasoline sales.
Online sales growth of 16, 4% was a key highlight for the quarter. We continued to see strong customer response to Autodesk partnership with growth in our marketplace channel up over 30%.
Underlying operating margin in the U S was four 4% down 30 basis points from the prior year due to the price investments and a change in sales mix from online and pharmacy sales.
Jolanda Poots-Bijl: While online sales is profitable on a fully allocated basis, it still continues to have a diluted impact to the overall margin profile. Turning now to Europe, sales were €9.9 billion, an increase of 13.4%. This is driven by the integration of Profi, which had an impact of 8.4% and the positive impact from comparable sales growth of 4.9%. Net sales were negatively impacted by 0.4 percentage points from the change in operating model at affiliated stores in Belgium. We expect minimal impact in the second half of this year. Europe's comparable sales growth includes the following: a negative impact of 1.6 percentage points from the end of tobacco sales and a positive impact of 0.7 percentage points from the calendar shifts for Easter. bol.com and Gall & Gall are another very strong quarter, growing nearly 13% as they adapt swiftly to evolving customer trends. Shopping habits shift.
While online sales is profitable on a fully allocated basis. It still continues to have a dilutive impact to the overall margin profile.
Turning now to Europe sales were $9 9 billion, an increase of 13, 4%.
This is driven by the integration of trophy, which had an impact of eight 4% and the positive impact from comparable sales growth of four 9%.
Net sales were negatively impacted by 0.4 percentage points from the change in operating model at affiliate affiliated stores in Belgium.
We expect minimal impact in the second half of this year.
Europe's comparable sales growth includes the following and negative impact of one six percentage points from the end of tobacco sales and the positive impact of <unk> seven percentage points from the calendar shift for Easter.
Full enjoying another very strong quarter growing nearly 13% as they adapt swiftly to evolving customer trends.
Looking habits shifts Bull has responded by adding carefully selected international selling partners and brands that live up to their high standards. So far this year around 300 International partners have been added to the platform.
Jolanda Poots-Bijl: bol.com has responded by adding carefully selected international selling partners and brands that live up to their high standards. So far this year, around 300 international partners have been added to their platform. bol.com has also expanded their refurbished range to 10 categories. Underlying operating margin in Europe was 3.7%. In line with the prior year, strong performance in the Benelux region was offset by the diluted impact from the first-year consolidation of Profi. Moving on to slide 21, Q2 free cash flow was €517 million, which represents an increase of €139 million compared to Q2 2024. This was largely related to an increase of our net investments and improvements in networking capital from timing differences. In today's world, technology is changing at lightning speed. Investing in technology and leveraging the power of AI is crucial to enable us to innovate for growth and efficiency.
<unk> also expanded the refurbished ranged to 10 categories.
Underlying operating margin in Europe was three 7% in line with the prior year strong performance in Benelux region was offset by the dilutive impact from the first year consolidation of Delphi.
Moving on to Slide 21, Q2 free cash flow was 507 million Euro, which represents an increase of $139 million compared to Q2 2024.
This was largely related to an increase of our net investments and improvements in networking capital from timing differences.
In today's world technology is changing at lightning speed investing in technology and leveraging the power of AI is crucial to enable us to innovate for growth and efficiency.
Jolanda Poots-Bijl: We are continuously looking to simplify our ways of working, and technology is an important enabler. Across the organization, we have more than 390,000 associates who serve over 72 million customers weekly. We are investing in technology that helps streamline their tasks and enhance their daily work experience so they can deliver exceptional service and contribute meaningfully to their communities. We have made good progress in this front during the quarter with several initiatives we believe can scale over time. Here are a few examples. Most of our European brands have introduced AI-driven assistants, including MaxiGPT in Serbia, LionGPT at Delhaize, Albert at Albert, and the assistant at Albert Heijn. Through the AI solutions, associates have the right information at their fingertips to help customers better and faster, while also making the associates' responsibilities easier and more enjoyable.
We are continuously looking to simplify our ways of working and technology is an important enabler.
Across the organization, we have more than 390000 associates, who serve over 72 million customers weekly.
We are investing in technology that help streamline that tasks and enhance their daily work experience. So they can deliver exceptional service and contribute meaningfully to their communities.
We have made good progress on this front during the quarter with several initiatives. We believe can scale over time here are a few examples.
Most of our European brands have introduced AI, driven assistance, including Maxi GPT in Serbia lie in GBT at Dell has Albert at Outback and assistant it all the time.
Two of the AI solutions associates have the right information at the fingertips to help customers better and faster, while also making the associates responsibilities easier and more enjoyable.
Jolanda Poots-Bijl: After a successful pilot, Albert is rolling out AI technology that helps cashier quickly identify items without barcodes, such as baked goods, fruit, and vegetables. A camera captures an image of the product, and AI quickly identifies the product. The solution significantly reduces manual errors and waiting time while simplifying the checkout process for associates. In the U.S., we've rolled out updates to our Spectrum proprietary technology to simplify and modernize our management for online fulfillment. Updates are focused on an improvement in intuitive user experiences, both for associates responsible for picking online orders. Our investments, both internally and externally, underscore our commitment to technology investments across both consumer-facing and back-office solutions. These investments enable our brands and our associates to serve customers better every day. Another area where I'm proud of the progress we're making is on our ambition to increase healthy food sales.
After a successful pilot all of it is rolling out AI technology that helps cashes quickly identify items without barcodes, such as baked goods fruit and vegetables.
And camera captures an image of the product and AI quickly identifies the product.
The solution significantly reduces manual errors and waiting time, while simplifying the checkout process for our associates.
In the U S. We've rolled out updates to our spectrum profile technology to simplify and modernize our management for online fulfillment.
Updates are focused on an improvement in intuitive user experiences both for associates responsible for picking online orders.
Our investments both internally and externally underscore our commitment to technology investments across both consumer facing and back office solutions.
These investments enable our brands and our associates to serve customers better every day.
Another area, where I'm proud of the progress we're making is on our ambition to increase healthy food sales.
Jolanda Poots-Bijl: Our brands are committed to offering the right assortments, making healthier and more sustainable options both affordable and accessible. We strive to guide customers and communities towards positive choices that help them live healthier and more sustainable lives. A good example is Albert Heijn's introduction of new blended products combining animal and plant-based ingredients. These products offer a familiar taste and texture, improved nutritional value, and a lower carbon footprint. This way, Albert Heijn is helping customers make more conscious choices. Delhaize recently launched a Call It Your Summer campaign. The campaign educates customers about the benefits of healthy eating, as well as the cost advantages of seasonal products, both to your budget and the environment. Delhaize also continues to support healthy choices by offering a 10% discount on fresh produce through their loyalty program.
Brands are committed to offering the right assortments, making healthier and more sustainable options, both affordable and accessible.
We strive to guide customers and communities towards positive choices that help them live healthier and more sustainable lives.
Good example is all the time as introduction of new blended products, combining animal and plant based ingredients. These products offer a familiar taste and texture improved nutritional value and a lower carbon footprint.
This way all the time is helping customers make more conscious choices.
Dell has recently launched a colleague Osama campaign the campaign educating customers about the benefits of healthy eating as well as the cost advantages of seasonal products.
Both to your budget and the environment.
That has also continues to support healthy choices by offering a 10% discount on fresh produce through that loyalty program.
Jolanda Poots-Bijl: Our brands are at the heart of our communities, and I'm confident we're taking the right steps to support the long-term health of those communities. That wraps up my financial review of Q2 and brings me to our outlook. The teams have delivered a strong first half of the year, and our performance thus far in the third quarter is reassuring. Therefore, we reiterate our guidance for the full year: underlying operating margin of around 4%, free cash flow of at least €2.2 billion, gross capital expenditures of around €2.7 billion, and diluted underlying EPS growth at mid to high single-digit rate based on an average euro to U.S. dollar exchange rate for the full year of 110. Diluted underlying EPS results at actual rates are subject to dollar volatility.
Our brands are at the heart of our communities and I'm confident we're taking the right steps to support the long term health of those communities.
That wraps up my financial review of Q2 and brings me to our outlook.
The teams have delivered a strong first half of the year and our performance. This far in the third quarter is reassuring. Therefore, we reiterate our guidance for the full year.
Underlying operating margin of around 4% free.
Free cash flow of at least $2 2 billion Euro.
Gross capital expenditures of around $2 7 billion euro and diluted underlying EPS growth at mid to high single digit rate based on an average euro to U S dollar exchange rate for the full.
Yeah 110.
Diluted underlying EPS results at actual rates are subject to volatility.
Jolanda Poots-Bijl: As we look to the remainder of the year, while we are happy with the early momentum in our company performance, we have ambitious targets, and we will continue to invest diligently to spur momentum through the holiday season and into the new year. Our teams in the U.S. and in Europe remain laser-focused on harnessing the strengths of our own great local brand portfolio, delivering high-quality products, driving innovation, and ensuring low prices to create compelling value that resonates with our customers. I'm confident that our focus on striking the balance between investing in growth and unlocking opportunities to drive operational excellence will continue to create value and increase shareholder returns over time. With that, I thank you for tuning in. Sharon, please open the lines for questions.
As we look to the remainder of the year, while we are happy with the early momentum in our company performance, we have ambitious targets and we will continue to invest diligently to spare momentum through the holiday season and into the new year.
Our teams in the U S and in Europe remain laser focused on harnessing the strength of our own great local brand portfolio delivering high quality brought it projects driving innovation and ensuring low prices to create compelling value that resonates with our customers.
I am confident that our focus on striking the balance between investing in growth and unlocking opportunities to drive operational excellence, we will continue to create value and increasing shareholder returns overtime.
With that I. Thank you for tuning in and Sharon. Please open the lines for questions.
Sharon: Thank you. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now go to your first question. One moment, please. Your first question comes from the line of William Woods from Bernstein. Please go ahead.
Thank you to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
We will now go to your first question.
And then please.
And your first question comes from the line of William <unk> from Bernstein. Please go ahead.
William Woods: Hi. Good morning. The first question is on Stop & Shop. One of the challenges with big investment cases is getting comfortable with what you are doing there. Are you able to give any concrete or tangible examples of what you are investing in, and then how that is driving net share in the forward market?
Hi, Good morning. The first question is on stock on shelf.
One of the tranches with Big investment can you just kind of getting worse.
Youre doing are you able to give any concrete or kind of tangible examples of what you're investing in and then how that is driving that Sharon malka you start the <unk>.
Frans Muller: Can you start the question round? Can you hear me?
Question around.
Banking Union.
Sharon: Apologies, William. One moment, please. Please stand by. Can you hear me?
Apologies William of one moment please.
Please standby.
Can you hear me now.
Frans Muller: Oh, we can hear you. Yeah. Thank you.
We can hear you yeah. Thank you. Thank you very much Sir I will now hand over to William Woods from Bernstein for his first question. Please go ahead.
Sharon: Thank you very much, sir. I will now hand over to William Woods from Bernstein for his first question. Please go ahead.
William Woods: Hi. Good morning, team. The first question is on Stop & Shop. One of the challenges is understanding what you are doing on a tangible level and getting comfortable with how that is going to feed through into net promoter score and market share. Are you able to share any more tangible examples of what you are investing in or what you are changing that is driving market share or NPS change? The second one is you talked about price investments in the release. Last year, we also talked about store remodels. How are the Stop & Shop store remodels going? I suppose, how did the Food Lion omnichannel remodels progress as well? Thanks.
Hi, good morning team.
So one.
One of the challenges understanding kind of what youre doing on a kind of tangible level and getting comfortable with how that's going to feed through into net promoter score and market share are you able to share any more tangible examples of what you're investing in wootton changing that's driving market share and yes, Jamie.
Good morning, you talked about price investments.
In the release.
But last year, we also talked about store Remodels, how are those two still control store remodels.
And how did the feed line ACR Omnichannel remodels, congrats as well thanks.
Frans Muller: Thank you, William. On Stop & Shop, I had yesterday an interesting discussion with our brand president, Roger Wheeler, and asked him how we are cruising. Apart from the good numbers we see so far, we see positive volumes at Stop & Shop. We see a positive growing NPS score. We see price perception getting better. At the same time, although more than 40% of the store network invested in pricing, it will also go on in the second half. We, of course, strengthened our own brand assortment, and we are just doing this for the total U.S. We will remodel 20 more stores this year. We have a better supply chain, and that was already anticipated, a better supply chain than last year. There are a number of elements there where we are quite optimistic about the Stop & Shop development.
Thank you William.
Shop in shop.
Not just in the interest and discussion with our brand Presidents Roger Wheeler.
And.
And ask him.
Oh, we are cruising apart from the numbers, we see so far we see positive volumes set a stop and shop, we see positive growing NPS score, we see price perception getting better but at the same time, although more than 40% of the store network investments in pricing and a goal to go on in the second half.
We of course strengthened our own brand assortment and we are just doing this for the total U S. We will remodel 20 more stores this year.
We have a better supply chain.
And that was already anticipated the better supply chain than last year. So there are a number of elements there where we are quite optimistic about the stop <unk> shop development.
Frans Muller: The team of Roger changed quite a bit on operations, on strategy, on procurement, and on merchandising. Those are elements which are giving us the confidence that we are on the right track. Having said that, and we talked about that before, to turn around a brand as we have in mind will take a little bit more than a quarter. We are on the right track. That's why we positively also share with you that we have positive volumes, a positive NPS, a better price perception, and those are important ingredients for Stop & Shop to grow that brand.
Jim of Roger.
Changes quite a bit on operations on strategy on procurement and on merchandising.
And those are elements.
<unk> are giving us confidence.
Beyond the rhetoric, having said that and we talk about that before.
To turn around our brand as we have in mind will take a little bit more than a quarter.
But we are on the right track and Thats why we positively also share with you that we did.
We have positive volumes positive NPS, Tibet breast perception and dose are important ingredients for stop <unk> shop.
To grow their brand.
Sharon: Thank you. We will now go to the next question. The next question comes from the line of James Anstead from Barclays. Please go ahead.
Thank you.
We will now go to the next question.
And the next question comes from the line of James Anstead from Barclays. Please go ahead.
William Woods: Good morning, Frans, Jolanda. Two questions from me, if that's okay. Firstly, I know you don't give quarterly guidance on divisional margins, but your U.S. margins were down year on year by about 30 bps in both Q1 and Q2. My question is whether it's reasonable to hope for a more modest year-on-year decline in the second half, given you start to cycle that Stop & Shop price investment, or are there other things we should bear in mind? That's the first question. The second one is you call out the diluted impact on U.S. margins from the good growth you're getting in online and pharmacy sales. If my math is right, it looks like online is contributing just over 1 point to your U.S. comp store sales. Can you give us some color on whether pharmacy sales are contributing similarly to U.S. comp store growth?
Good morning funds and Honda.
Two questions for me if that's okay.
Firstly I know you don't give quarterly guidance on divisional margins, but Youll U S margins were down year on year by about <unk>.
30 basis points in both <unk>.
So my question is whether it's reasonable to hope for a more modest year on year decline in the second half given you start to cycle that stocking stock price investments or are there other things we should bear in mind that the third question.
And the second one is you called out the dilutive impact on U S margins from the good quality of getting involved in online pharmacy sales.
The math is right it looks like online contributing just over one point to your U S comp store sales can you give us some color on whether pharmacy sales contributing similarly to the U S comp store growth.
William Woods: Any color there would be helpful. Thank you.
Yeah any color there would be helpful. Thank you.
Jolanda Poots-Bijl: Thank you for the questions. Like you said, we do not give guidance on a regional level. Let us start with the group guidance. We are confident that we are well positioned to deliver the around 4%. Going a little bit more deeper, we are driving growth by investing in price, as you stated, which is at the expense of some margins, offset also by heavy cost initiatives on our sides. Also, the diluted impact, indeed, on growth of online and RICs is having an impact on the margins. Like you said, I can confirm that the price investments in itself weigh heavier on the first half year than on the second half year because we are cycling the price investment that we already started last year. That is correct. On the positive side, U.S.
Thank you for that thank you for the questions and like you said, we don't give guidance on regional lessor.
Level, so let's start with the guidance and we're confident that we're well positioned to deliver the around 4%.
Getting a little bit more deep and we are driving growth by investing in price as you stated and which is at the expense of some margin offset by heavy cost initiatives and are on our sites and also the dilutive impact indeed on growth of online in <unk> Ah is having any impact on the margin.
Like you said I can confirm that the price investments in itself weigh heavier on the first half year than in the second half year, because we're cycling the price investments that we already started last year.
So that is so that is correct on the positive side U S margin I would say positive volumes online, although with a lower margin than the overall margin. It is profitable now and we have a cost savings of around two 5 billion euro for the group as a whole and we're trending well against that on the negative science, we have the sales mix.
Jolanda Poots-Bijl: margin, I would say it is positive volumes online, although with a lower margin than the overall margin, it is profitable now. We have our cost savings, €1.25 billion for the group as a whole, and we are trending well against that. On the negative sides, we have the sales mix with the margin impact of RICs and online. All in all, I think we have all the tools available to sustain healthy margins in 2025 and to drive that long-term growth that we are aiming at. Your second question, online RICs. The RICs contribution to comps is a little bit less than the online contribution, and overall RICs is somewhere between 6% and 7% of overall U.S. revenues.
With the margin impact of Rx and online.
But all in all I think we have all the tools available to sustain healthy margins in 2025 and to drive that long term growth that we're aiming at.
And your second question online our eggs and the Rx contribution to comps is a little bit less than the online contribution in overall Rx is somewhere between 6% and 7% of overall U S revenues.
Okay.
William Woods: Okay. That's very helpful. Thank you.
Okay. That's very helpful. Thank you.
Sharon: Thank you. Your next question comes from the line of François Digard from Kepler Cheuvreux. Please go ahead.
Thank you.
Your next question comes from the line of Francois. Thank all from cabinets Suva. Please go ahead.
Fernand de Boer: Good morning. Two questions. The first on guidance. You started the year with the dollar as a tailwind and is now a headwind. However, you issued only a small caveat on the full-year EPS impact. Would you say that your underlying operations are stronger than you anticipated initially? If so, where more specifically? My second question is about online sales profitability. You quoted four drivers. Could you tell us their respective importance? Do you see retail media mainly as a sales accelerator or a profit contributor? Thank you.
Good morning.
Two questions. The first one on guidance you started the year with Google Earth tailoring them as metal headwind.
Shoots all of your small caveats on the full year EPS impact would you say that your underlying operations are strong.
Than you anticipated.
Initially the pursuit, where most specifically on.
And my second question is about the online service profitability.
You quoted.
Core drivers could you tell us the respective importance on did you see retail many of the cells exit of a thorough profit contributor. Thank you.
Yeah.
Jolanda Poots-Bijl: Thank you for those questions. Yes. If I look at our guidance, we are well positioned, had a solid start of the year, and that enabled us to reiterate that guidance. What we did is we tried at least to give you a clear framework on the impact of FX, mainly on EPS, because the impact is the most direct in that perspective. We shared our guidance of mid to high single-digit growth on underlying EPS in February this year, which was based at that time on the FX rate of 104. When presenting the Q1 numbers, we added to our guidance that our guidance holds true up to an average of 110 throughout the year. That is the guidance and framework that we have presented to you to interpret our results. We are happy with the way we are trending this far.
Thank you for those questions.
Yes, if I look at our guidance, we are well positioned had a solid start of the year and enabled us to reiterate that guidance and what we did is we tried at least to give you a clear framework on the impact of ethics, mainly on EPS because the impact is the most direct are in that.
Perspective, so we shared our guidance of mid to high single digit growth on underlying EPS in February this year, which was based at that time on on the FX rate of 104 and presenting the Q1 numbers, we added to our guidance that our guidance holds true up to an average of 110 throughout the year.
And Thats the guidance and framework that we've presented to you to input interpret our results were happy with the way we're trending this fall and you should bear in mind that our focus of course is on the underlying performance because that's what we can manage and that's why we are very confident that we will be able to deliver 82.
Jolanda Poots-Bijl: You should bear in mind that our focus, of course, is on the underlying performance because that is what we can manage. That is where we are very confident that we will be able to deliver. Maybe two additional sentences because FX is important. Our capital allocation remains the same. From a cash flow perspective, we are able to manage this. Last but not least, we reiterate our guidance on year-on-year growth for our dividend. All in all, I hope that that gives you enough perspective. Frans, over to you for the online sales.
<unk> sentences, because FX is important our capital allocation remains the same so from a cash flow perspective, we're able to manage days and last but not least we reiterate our guidance on year on year growth for our dividend. So all in all I hope that gives you enough perspective Frans over to you for the online sales.
Fernand de Boer: Thank you, Jolanda. I share the confidence. This is the first year of our Growing Together plan. We are also comparable, even without Maxi, at a 4% growth level, apart from all the other drivers which are going in the right direction. So it is a good year to ramp up the coming years. That is what the teams are working on. Back to online profitability, François Digard, your question. I think we have a fundamental change in our U.S. business, how we operate. We transferred a lot of dedicated fulfillment centers into in-store pick, very well from a productivity point of view. We sweat our store assets. We have Prism and Spectrum software now in four out of the five brands. That is also increasing productivity and also a better customer experience.
Thank you Yolanda.
Sure. The confidence this is the first year of our growing together plan and we are also comparable even without brophy at the 4% growth level apart from all the other drivers which are going the right direction. So it's a good year to ramp up for the coming years and that's what the teams are working on back to online profitability.
Thanks for your question.
I think we have a fundamental change in our U S business, how we operate we transferred a lot of fulfillment.
Fulfillment dedicated fulfillment centers into in store pick.
Very well from a productivity point of view, we sweat our store assets, we have prism and spectrum software now in four out of the five brands and that is also increasing productivity and also a better customer experience.
Fernand de Boer: We have an automation element also in our e-commerce picking, especially in the Netherlands, where we have not two fully automated centers. We have, of course, a very strong relationship in the U.S. with DoorDash and Instacart, which is roughly now that platform business, roughly representing 40% of our total online business and growing fast. We also see a lot of new customers coming towards us, as you heard from Jolanda Poots-Bijl and myself before, through the DoorDash and Instacart network. Let us not forget that bol.com is also part of the Total Profitability Company. bol.com was always profitable for a long time already. So we now talk about fully allocated, which is the most conservative way of calculation. We do not cut any corners here. Fully allocated overall business profitability for our e-commerce for the group.
We have an automation element also in our in our ecommerce speaking, especially in the Netherlands, where we have not fully automated centers.
We have of course, a very strong relationship in the U S with door Dash and instant guard, which is roughly now that platform business roughly representing 40% of our total.
Online business and growing fast and we also see a lot of new customers coming towards us as you heard from from Yolanda myself before through the door doesn't ensue card network.
And let's not forget that ball is also a part of the total profitability company, but ball was always profitable.
For a long time already so I will now talk about 40 allocated which is the most conservative way of calculation. There are no. We don't cut any corners here at fully allocated overall business profitability for our ecommerce for the group and Thats. What we are pretty proud about and also came in a little bit earlier for the.
Fernand de Boer: That is what we are pretty proud about and also came in a little bit earlier for the reasons I just mentioned. Retail media is a part of that, but is not the main driver of this productivity gain. Thank you. On retail media, more specifically, do you see it as a sales accelerator or mainly a profit contributor?
Reasons, I, just mentioned and retail media is a part of that.
But it's not the main driver of this productivity gain.
Thank you.
More specifically do you see it as a sales accelerator or mainly a profit contributor.
Frans Muller: Yeah. I mean, it is for sure a profitability contributor or another contribution to reinvest in our business, reinvest in our sales. So on one hand, profit; on the other hand, reinvestment and therefore sales generation. The other thing that was interesting, François, is that our tools are pretty good in both Europe and in the U.S. So if we talk to our vendors, who are also the advertisers for a big part, and we talk about our retail media conversion rates, they do very well. So also that means that it is not only for them an attractive tool to use because the tooling is really first-class. We win prizes in the U.S. in loyalty and retail media.
Yes.
I mean, it's for sure.
Profitability contributor or in another contribution to reinvest in our business.
We invest in our sales of one on one hand.
Profit on the other hand, the reinvestment and therefore sales generation and the other thing was interesting Francois is that our tools are pretty good in both Europe and in the U S. So if we talk to our vendors who are also advertisers for a big part and we talk about our retail media conversion rates they do vary.
Well so also that mean.
It means that there is not only for them an attractive tool to use because of the tooling is really first class when prices in the U S and loyalty in retail media.
Frans Muller: Also, in the end, if the tools are good and the conversions are good, then also there, indirectly through our vendors, is a reason to invest in our business and therefore also a sales generator. I think those two elements are also important elements which caused the positive volume growth in the U.S. as well.
But also Indiana, if the tools are good at the conversions are good that ultra dare indirectly through our vendors is a reason to invest in our business and therefore also in our sales generator I think those two elements are ultra important elements, which caused the positive volume growth in the U S as well.
Fernand de Boer: Great. Thank you very much.
Great. Thank you very much.
Sharon: Thank you. Your next question comes from the line of Rob Joyce from BNP Paribas. Please go ahead.
Thank you.
Your next question comes from the line of work doing so from BNP Paribas. Please go ahead.
William Woods: Hi. Thanks very much for taking the questions. The first one, just going back to that margin, I guess the guidance for the year implies a kind of flattish margin in the second half to get there. Just looking beyond that, the average 4% over the period out to 2028, do we feel now that the U.S., the investments are going to start to match the cost savings? More broadly, we found a floor for the EBIT margins. The second one is just if you could give us a bit of an update on the more recent trends you've seen since the quarter ended. Have we seen any kind of significant changes versus the growth rates we've seen in the second quarter in the U.S. and in Europe? Thanks very much.
Hi, Thanks, very much for taking the questions.
First one just.
Going back to the margin I guess the guidance for the year implies kind of.
Flattish margin in the second half to get there.
Just looking beyond that the average 4% over the period out to 2028 do we feel now that the U S. The investments are going to start to match the cost savings and more broadly.
We found before for the EBIT margins.
And the second one is just if you could give us a bit of an update on the more recent trends you've seen since the quarter ended.
Are we seeing any kind of significant changes versus the growth rates, we've seen in the second quarter in the U S and in Europe, Thanks very much.
Frans Muller: Sorry. Could you repeat your second question, please, because I have not acoustically correctly got it?
Sorry could you repeat your second question. Please because I have a acoustically correctly got it sorry.
William Woods: Sorry. Just trends to date you're seeing in Q3. Are you seeing anything significantly different versus what you saw in the second quarter, both U.S. and Europe, please?
Just on trends to date, you are seeing in Q3 and are you seeing anything significantly different versus what you saw in the second quarter, both U S and Europe. Please.
Jolanda Poots-Bijl: Okay. Thank you for your questions. On the first question, yes, we are balancing our cost savings and our price investments. We are really driving growth. When we have the opportunity to invest a little bit more in price to drive that growth faster and earlier, we will do so. We are confident that the guidance given of around 4 and the average 4 in the four-year period, that we will be able to manage that. Like I said, if there is an opportunity to drive growth a bit more, we will use that.
Okay. Thank you for your thank you for your questions and on the first question. Yes, we are balancing our cost savings and our price investments and we are really driving growth. So when we have the opportunity to invest a little bit more in price to drive that growth faster and earlier, we will do so <unk>.
Incident that the guidance given a variety for and the average for in the four year period.
That we will be able to manage that and like I said, if there is an opportunity to drive growth a bit more we will they will use that.
Frans Muller: Yeah. I am not talking about my confidence, but I am talking about if P7 should be an interesting indicator for the ongoing positive acceleration of growth trend, then that will be the answer. At the moment, we see a good growth in P7. I think it is a good proxy for the rest of the year, apart from the fact that the business is planning for the growth we have envisaged as a ramp-up for the total 2026, 2027, and 2028 years. So, good growth trajectory, good momentum, and good acceleration.
And if I.
I'm not talking about my confidence, but I'm talking about if P. Seven should be an interesting indicator for the ongoing positive acceleration of growth trend than.
Then that will be the answer at the moment, we see a good growth in <unk> seven I think is a good proxy for the rest of the year apart from the fact that the business is planning for the growth we have ambitious as a ramp up for the total 2026, 27% in 2008 years. So.
Good growth trajectory good momentum good acceleration.
William Woods: Sorry, Frans, did you say Q1 is an acceleration on the second quarter?
I'm sorry did you say seven is an acceleration on the second quarter.
Frans Muller: We shared with you that the second quarter was already an accelerator of growth compared to the first quarter. We see a continuation of that type of growth levels also in P7.
We shared with you that.
The second quarter was already an accelerator of growth compared to the first quarter and we see a continuation of that type of growth levels.
Also MP seven alright, thank you very much.
William Woods: Great. Thank you very much.
Sharon: Thank you. Your next question comes from the line of Robert Jan Vos from ABN AMRO ODDO BHF. Please go ahead.
Thank you.
Your next question comes from the line of Robert Jan Vos from ABN Amro.
Please go ahead.
Frans Muller: Yes. Hi. Good morning. Two questions from my end. Comparable growth, excluding weather and calendar, amounted to 5.8% in Europe in the quarter. That is an acceleration from 4.8% in Q1. We saw that online sales growth accelerated as well, but probably not to the extent that it can explain the full 100 basis points. Can you elaborate a bit on this acceleration, talking a bit about volumes and prices? That is my first question. My second question is, can you also elaborate on the incremental impairments? It is a nitty-gritty question, I know, but on the incremental impairments of 41 million for operating stores in the U.S., please. Thank you. On your first question, we talk about total growth. It is including new store openings. That is one thing. There is also a little bit more inflation in both the U.S. and in Europe.
Yes, hi, good morning, two questions from my end.
Comparable growth, excluding weather and calendar amounted to five 8% in Europe in the quarter, that's an acceleration from four eight in Q1.
We saw that online sales growth accelerated as well, but probably not to the extent.
That would kind of explain the full 100 basis points. So can you elaborate a bit on this acceleration talking a bit about volumes and prices. That's my first question and my second question is.
Can you also elaborate on the incremental impairments. It's an integrated question I know, but on the incremental impairments of $41 million for operating stores in the U S. Please thank you.
Yes on your first questions on the first question we talk about.
Total growth her show is including new store openings and Thats, one thing and there is also a little bit more inflation.
In both the U S and in Europe and.
Frans Muller: If you talk about the inflation in the U.S., food at home, 2.2%. For example, the Dutch market, we do not have a European number. For the Dutch market, it is 4% in the meantime. We see a little bit more inflation as well. It is not a nitty-gritty question, but Jolanda Poots-Bijl takes it with a lot of respect, the second one.
If we talk about inflation in the U S.
Food at home to two but for example, the Dutch market, we don't have a European number for the Dutch market is 4% in the meantime, so sheila with more inflation as well, it's not a nitty gritty question, but youll undertakes it with a lot of respect to the second one.
Jolanda Poots-Bijl: I take it with pleasure. The unusuals, as we call them, in the second quarter were related to individual store impairments and the integration costs of Profi. The individual store impairments were mainly related to stores in the U.S. That was spread out through the portfolio. It is our regular process to, in a very conservative way, by the way, store by store, look at the financials and impair early if we think it is necessary. It is nothing that major has major concerns in it.
With pleasure.
Are the unusual as we call them in the second quarter were related to individual store impairments and the integration cost of <unk>. The individual store impairments were mainly related to stores in the U S and that was spread out through the portfolio meets on a regular process too in a very conservative way Baidu app store by store.
Sure.
Look at the financials and impact early if we think it's necessary.
It's nothing that major as major concerns in it.
Frans Muller: It's a time of the year where.
It's the time of the year.
Jolanda Poots-Bijl: It's the regular process of.
The regular price sales subsidiary Arctic on store level, yes.
Frans Muller: periodic on-store level.
Jolanda Poots-Bijl: Yes.
Frans Muller: Conservative way of looking at the business and protecting ourselves.
With that way of looking at the business and protecting ourselves we take eye pain, rather early than later.
Jolanda Poots-Bijl: We take out pain rather early than later.
Frans Muller: Yeah. That's very clear and helpful. So it's not necessarily focused on Stop & Shop; it's across the.
That's very clear and helpful. It so it's not necessarily a year focused on scope in children.
It's across.
Jolanda Poots-Bijl: No, indeed. As I said, it was a spread through our portfolio in the U.S. and it touches almost all the brands in this quarter. So it is not specifically Stop & Shop related.
Indeed, as I said it was it's a threat to our portfolio in the U S and you touch it touches almost all the brands and this quarter. So I know, it's not specifically stop and shop related.
Frans Muller: Very clear. Thank you.
Okay, Peter Thank you.
Jolanda Poots-Bijl: Thank you.
Thank you.
Sharon: Thank you. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. We will now go to the next question. Your next question comes from the line of Sreedhar Mahamkali from UBS. Please go ahead.
Thank you as a reminder, if you wish to ask a question. Please press star one on your telephone keypad.
We will now go to the next question.
And your next question comes from the line of <unk> Mellon Collie from UBS. Please go ahead.
Fernand de Boer: Hi. Good morning. Thanks for taking my questions. If I can just follow up on the impairments, please. Most of my questions were asked, so I am left with a couple of technical ones. Clearly, there was $41 million in the quarter in the U.S. in terms of impairments. More broadly, if you stand back, there is a considerable step up in the run rate over the past three years in the U.S. specifically, and $200 million plus per year run rate of impairments. Have you changed the way you are testing for impairment, or is it the online is sort of driving you to reassess the store's NPV? So that is the first one on impairments, more philosophically, what is changing and how should we think about it? Secondly, cash flow. Can you talk a little bit about the drivers of working capital in Q2?
Hi, Good morning, Thanks for taking my question, if I can just follow up on them.
<unk> please.
Please.
Most of my questions were also left with a couple of technical ones.
Clearly there was $41 million in the quarter in the U S. In terms of impairment, but more broadly if you stand back there is a considerable step up in the run rate over the past three years in the U S. Specifically.
200 million plus for the year.
Run rate of impairment.
Change the way your that's been put impairment or is it the online news sort of driving you to re access to the stores MPV. So that's the first one on impairments more philosophically what is changing and how should we think about it.
Secondly, cash flow.
Can you talk a little bit about the dry with the working capital in Q2, it seems to be driven by payables.
Fernand de Boer: It seems to be driven by payables, but if you could expand, that will be great. And your expectations for the year on working capital. Thank you.
That'll be great and your expectations for the year on working capital.
Jolanda Poots-Bijl: Thank you, Sreedhar Mahamkali, for your questions and very important questions. Thank you for analyzing the trends so well. There is no increase in run rates because bear in mind, we had the Stop & Shop closures, which had a big impact. We had FreshDirect in there. We closed down in line with the online strategy that Frans Muller was talking about, shifting from fulfillment to store-first focus, switching our assets, you could say. We closed some fulfillment stores as well. So fulfillment facilities, sorry. It's FreshDirect, Stop & Shop, which was, of course, a big event, and the fulfillment that maybe needs to be taken out of your numbers. Then you see that the underlying trend is quite stable for time. The working capital, I can be very short. It's just phasing. Overall, I expect to land on the projections we have internally.
Thank you <unk> for your questions and important questions and thank you for analyzing advance so well no. There is no no increase in run rates because bear in mind, we have to stop and shop closures, which had a big impact we had fresh direct into.
And we closed down in line with the online strategy that funds was talking about shifting from fulfillment to install first focus is matching our assets you could say and we close some fulfillment stores as well so.
Fulfillment facility, sorry, so it's fresh direct stop and shop, which was of course, a big event and the fulfillment.
That maybe needs to be taken out of your numbers and then you'll see that the underlying trend is quite stable, though for China and the working capital I can be very short it's just phasing.
So overall I expect to land on the projections, we have internally and a Q2 year to date.
Jolanda Poots-Bijl: The Q2, year to date, positive impact is phasing only.
The positive impact it is facing only.
Yes.
Fernand de Boer: are your expectations for the year, Jolanda Poots-Bijl, in terms of what we should be thinking for working capital?
And your expectations for the year in terms of what we should we think working capital.
Jolanda Poots-Bijl: We don't give our guidance on a working capital level. We reiterated our free cash flow, of course, to be a minimum of $2.2 billion.
And we don't if our guidance on a working capital level that we reiterated our free cash flow of course to be a minimum of $2 2 billion.
Fernand de Boer: Thank you.
Frans Muller: Sreedhar, to be very precise, your $200 million assumed run rate is not a run rate for us. The $200 million is an incidental thing, which Jolanda explained. Do not take that, please, for sure, not in our models because that is not the expectation we have at all.
Thank you.
Great that will be very precise or your $200 million.
Assumed run rate is not a run rate for us to $1 million as an incidental thing, which you Yolanda explain so don't take that please in your <unk> for short and our models because theres not a the expectation we have at all.
Fernand de Boer: No, no. Understood.
No no understood. Thank you very much.
Frans Muller: Thank you very much.
Okay.
Sharon: Thank you. We will now take our final question for today. The final question comes from the line of Fernand de Boer from Degroof Petercam. Please go ahead.
Thank you.
We will now take our final question for today.
And the final question comes from the line of fire then on table from the golf pay Telecom. Please go ahead.
Fernand de Boer: Yes, good morning. Thank you for taking my question. The first one is on the third-party sales growth in Europe. I think that slowed down to around 4% from 9% in Q1. Is there anything specific in that one? That is actually my question. Most of it is already asked.
Yes. Good morning. Thank you for taking my question. The first one is on the third party field trial in Europe, I think that's slowed down to around 4% from 9%.
In Q1 is there anything specific in that one.
Yeah. That's it for my question most of it is already Ark.
Frans Muller: So it's a Tony question. You got the budget for two.
So it's a Tony question, you've got the budgets for two.
Jolanda Poots-Bijl: But maybe he starts with one, and then the second one comes in, Frans.
But maybe start with one and then the second.
Fernand de Boer: Actually, it's all asked what I actually wanted to ask.
Exactly it's all asked what directly on the tour.
Frans Muller: Poots-Bijl, third-party business. Maybe share a little bit more about bol.com because there's quite some interesting and cool developments there.
Yolanda third party business, maybe and maybe share a little bit more about ball because there's quite some interesting developments there yeah, let's let's let's do say it's both.
Jolanda Poots-Bijl: Yeah, let's do so. bol.com, we're quite happy with bol.com. We always reiterate because we talk about online profitability as a key milestone. bol.com has been profitable all along. That's one point to keep in mind. They're growing market share. What I like is that they're also keeping their relative market share versus Amazon stable. All in all, bol.com is heading in the right direction, 12.5% by head growth in this quarter. If you look at their third-party sales, they are indeed showing great progress. That's stimulated in many ways. One of the examples I'd like to share is that we've added more than 300 international suppliers on our platform, driving that third-party growth and driving, of course, the overall growth of bol.com as well.
They are quite happy with where we always reiterate because we talk about online profitability is a key milestone by law has been approved.
Profitable all along so that's one point to keep in mind. They are growing market share what I like is that Theyre also keeping their relative market share versus our Amazon stable. So all in all a bolus.
Heading in the right direction to 12 five by had growth in this quarter and if you look at their third party sales and indeed are showing great progress that stimulated in many ways and one of the examples I would like to share is that we've added more than 300 international suppliers on our platform.
Driving that or third party are that third party growth and driving of course, the overall Gladstone Paul as well.
Frans Muller: Yeah. We see a little bit of an effect of the Far East Chinese markets developing in Europe. We think we see a little bit more muted growth on the Temu and Shein side. Therefore, what Jolanda Poots-Bijl is mentioning is quite innovative, that we have now 300 Far East suppliers, international suppliers direct on our platform, so not indirect. That growth we still see coming. That is a little bit the relative development. Do not read too much into this. Look at bol.com, 12.5% growth for the quarter, 10 categories with refurbished assortment new on bol.com. Quite some innovation there. I feel pretty good about the bol.com trajectory.
And I would say you will see a labored in effect of them.
The far East Chinese.
Markets developing in Europe. So we see we think we see a little bit more muted growth on the T Mo and Shane site.
And therefore.
Yolanda as mentioned and is quite innovative that we have not 300 far east suppliers International's replies direct on our platform show not indirect and that growth.
We still see coming so.
That's a little bit.
The relative development don't read too much into this.
Look at both 12, and a 5% growth for the quarter.
<unk> categories with refurbished assortment new on board quite some innovation there so.
Pretty good about the bold trajectory.
Fernand de Boer: Okay. Maybe one question to clarify. Jolanda, I think you said also on the U.S. online business, that was not profitable, or is the group level being profitable mainly driven by Europe?
Maybe one question to clarify Yolanda I think you said also on the U S online business that does not profitable or is the group level being profitable mainly driven by Europe.
Jolanda Poots-Bijl: The U.S. for the group as a whole and also for the U.S. individually, we are profitable in the online business. As Frans Muller mentioned, on a fully allocated basis, we have many perspectives to look at online profitability. We are now fully allocated profitable online both in Europe and in the U.S.
If the U S. This over the group as a whole and also for the U S. Individually, we are profitable in the online business <unk> business and as Frans mentioned in it.
In a fully allocated basis, so that really we have many perspective. They look at online profitability that we are now fully allocated profitable online both in Europe and in the U S.
Frans Muller: Okay. It is important to understand that very correctly, as Jolanda just mentioned. bol.com always has been profitable. The total group e-commerce business, including food, also profitable for the reasons we just mentioned. We celebrate this here in-house because it is a very conservative look at fully allocated. It comes earlier than we expected it to be and has to do with the things we discussed before, but also the sales. If you grow 14% group, 16% in the U.S., 12% in Europe, and the bol.com growth in line with the European growth, I think that is pretty strong.
It's important to understand that very correctly. So yolanda just mentioned bolt or waste has been profitable. The total group ecommerce business, including food also profitable for the reasons, we just mentioned.
And.
We celebrate this here in house, because it's a very conservative look at fully allocated.
Earlier than we expected it to be and has to do with the things we discussed before but also the sales and if you grow 14% group, 16% in the U S, 12% in Europe, and the ball growth in line with the European growth I think that's pretty pretty strong.
Jolanda Poots-Bijl: It is a good driver of our growth trajectory going forward so that profitability really supports.
The driver of our growth trajectory going forward I'd say that profitability really supports.
Frans Muller: I agree.
Fernand de Boer: Okay, thank you very much.
Great.
Okay. Thank you very much.
IR team: Thank you, Fernand. Thank you, everybody, for your two-question limit today. It was all very nicely done. That completes our conference call for Q2. If you have any further questions, please feel free to reach out to the IR team. We are available at your disposal. We will see you on Roadshow tomorrow. We will see you at the various conferences then again after the summer break in September. I wish you all a very nice and pleasant summer.
Thank you Herman and thank you everybody for your two question.
Limit today with all of them very nicely run that completes our conference call for Q2.
If you have any further questions. Please feel free to reach out to the IR team are available at your disposal and we will see you on road show Tomorrow, and we will see you at various conferences and again after the summer break in September So I wish you all a very nice and pleasant summer. Thank you for joining us thanks for Josh.
Jolanda Poots-Bijl: Thank you for joining us.
Frans Muller: Thanks for joining.
Fernand de Boer: Thank you.
Frans Muller: Enjoy your summer.
Okay.
Sharon: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.