We’ve fine-tuned our forecasts following yesterday’s publication of the 4Q11 sales figures. Our new EPS forecasts are the following: € 0.86 (old 0.87) for 2011, € 0.98 (old € 0.95) for 2012 and € 1.09 (old € 1.07) for 2013. We are now assuming a $ /€ of 1.29 (1.35 old) for 2012-2013.
Comforting sales trend despite tough trading conditions
Sales in the US came out in line with expectations, while in the Netherlands sales exceeded market expectations by 1.0% despite fierce competition as the conversion of Super de Boer stores into Jumbo stores continues. Whereas Delhaize America’s comparable store sales fell by 0.4% in 4Q11, Ahold reported identical sales growth of 2.9% excluding gasoline. Official food inflation was about 6% in theUS. Taking into account promotions and negative product mix effect (trading down), Ahold's prices were up about 5% in 4Q11. In other words, volumes were down about 2%. This trend is in line with 3Q11 if one excludes the positive effect (100bp) of hurricane Irene. Ahold's market share increased in the US both in $ and units. Ahold did not witness any change in the competitive environment in the US.
In the Netherlands, identical sales were up 2.9% on the back of higher prices. Volumes were flattish. Central European operations disappointed with a 3.5% decline in sales due to tough comparables, the remodelling program and competitive store openings. Note however that these activities represent only 6% of group sales.
Share buyback program and dividend policy
Of the € 1bn share buyback program that should be completed by March 2012, € 776m has been accomplished so far. The group bought 85.25m shares at an average price of € 9.106. Last November, the group announced that the dividend ratio would be increased to 40-50%.
Conclusions
Speculation regarding a potential acquisition (e.g. Wehkamp) should continue to impact the share price. The group is sitting on a gross cash pile (€ 2.3bn at the end of 3Q11) and is ready to pursue growth thanks to its streamlined organisation and harmonised business processes.
The 4Q11 results will be released on 1 March. We maintain our Accumulate rating and € 11.5 target as the stock continues to trade attractive multiples.