Royal Ahold NV shares fell the most in more than a year after the biggest Dutch retailer said it has been losing market share in the Netherlands and a plan to redistribute cash to shareholders fell short of some analysts’ expectations.
The company has been “slightly” losing market share in the Netherlands, where it operates Albert Heijn grocery stores, Chief Executive Officer Dick Boer told journalists on a conference call today. The CEO expects consumer spending to remain under pressure in the current quarter and doesn’t see any improvement in the trading environment in the short term.
“The numbers were a bit light in the Netherlands,” said Marco Gulpers, an analyst at ING in Amsterdam. “What is worrying to us is that the weak consumer sentiment is moving to a lower basket size in the Netherlands and that’s impacting market share.”
Ahold shares dropped as much as 4.3 percent in Amsterdam. The grocer has revamped its cheapest product offerings in a bid to lure more customers from rivals like Aldi shops. Still, consumers bought fewer items on each visit, Ahold said today, leading to a 0.2 percent decrease in identical sales in the third quarter, falling short of the 1 percent jump analysts had anticipated.
Underlying operating income fell 14 percent to 248 million euros at constant exchange rates in the third quarter, mostly due to restructuring, Ahold said. That missed the 311 million-euro average estimate of 13 analysts compiled by Bloomberg.
The shares fell as much as 59 cents to 13.14 euros and traded at 13.17 euros at 9:21 a.m. in Amsterdam. That was the biggest intraday decline since August, 2012.
Ahold expects to complete the 1 billion-euro ($1.35 billion) repayment transaction, which will be followed by a reverse stock split, in the first quarter of 2014, the Zaandam-based company said in a statement today.
Ahold said it has carried out about 30 percent of a 2 billion-euro buyback that’s due to be completed by the end of next year, returning cash after selling a stake in Swedish retailer ICA. JPMorgan Chase & Co. had said the retailer may return an additional 2 billion euros to shareholders by the end of 2014, with 1.5 billion euros of that announced today, while Bank of America Corp. had said the retailer could return as much as an additional 1.5 billion euros, though the figure would probably be closer to 1 billion euros.
“The capital repayment is at the low end of what we were expecting,” said Richard Withagen, an analyst at SNS Securities in Amsterdam. “The balance sheet is very solid and when you tell the market that you’re going to do something about capital structure, everyone starts fantasizing and having high expectations and 1 billion is at the low end.”
The retailer will request shareholder approval for the repayment and stock split at the annual general meeting in January.
In the U.S., where Ahold operates Stop & Shop stores, identical sales missed estimates, rising 0.6 percent, excluding gasoline, compared with the median prediction of 0.8 percent. Underlying operating margin dropped to 4 percent of sales from
4.1 percent a year earlier, missing a median estimate of 4.1 percent. Ahold now has 89 pick-up points for it online business in the U.S. and 15 in the Netherlands, it said today.
“The U.S. wasn’t a big miss but the company is still probably losing a bit of its competitiveness in the U.S.,” SNS Securities’ Withagen said. “Any initiative to repair that would be welcome by me.”
Ahold said in a separate statement that it agreed to sell its Slovakian business to Condorum. Ahold Slovakia operates 24 stores and had net sales of 159 million euros in 2012. The transaction is expected to close in the first half of 2014.
“The company is in a very healthy situation from our balance sheet point of view,” Boer told journalists today. “We continue to look at opportunities in adjacent markets or in markets where our business model can deliver value for ourselves and the customers. We don’t need acquisitions to grow, we also work very hard on organic growth.”