AMSTERDAM (Reuters) - Ahold Delhaize (AD.AS), the largest operator of traditional grocery stores on the U.S. East Coast, beat estimates for third-quarter earnings helped by cost cutting since its 2016 merger with Delhaize, sending its shares higher.
The company also said on Wednesday it would repurchase 2 billion euros worth of shares in 2018, following a 1 billion euro repurchasing program in 2017.
Ahold reported a 1.1 percent fall in pro-forma third-quarter sales to 15.1 billion euros ($17.5 billion), due to the weaker dollar, but quarterly net income rose to 362 million euros from 235 million euros a year earlier.
Analysts polled for the company had estimated sales at 15.2 billion euros and net income at 331 million.
Ahold, which generates roughly two thirds of sales in the United States, has seen its share price wilt this year in the ace of increased competition from discounters Lidl and Aldi, while its online grocery delivery business, Peapod, must compete with Amazon(AMZN.O) after its acquisition of Whole Foods.
Ahold’s shares rose more than 5 percent on Wednesday’s earnings news.
Ahold said it was on track to meet its free cash flow goal of 1.6 billion euros for the full-year 2017 as cost savings for the year will be 250 million euros, better than the 220 million initially targeted.
“In the United States, inflation returned at low levels, and sales performance further improved,” said CEO Dick Boer in a statement.
Boer noted the performance of Ahold’s online businesses, saying they grew more than 20 percent in the quarter.
“We continue to invest in online warehouse capacity and are on track to realize almost 3 billion euros in online consumer sales this year and nearly 5 billion euros by 2020”, Boer said.
Money manager Bernstein was positively surprised by the acceleration of cost savings, a doubling of the share buyback program and operating profit that was 4.6 percent ahead of market consensus.
“This sends a powerful signal to the market about their confidence in their business going into 2018,” it said in a trading note.
In the U.S., Ahold’s Giant and Stop & Shop stores saw sales rise 0.8 percent to $6.4 billion. Delhaize’s Hannaford and Food Lion stores increased sales by 2.2 percent to $4.4 billion.
In Europe, the Netherlands’ dominant Albert Heijn chain grew sales by 4.1 percent to 3.3 billion euros, while at Belgium’s dominant Delhaize chain sales were flat at 1.2 billion.
Reporting by Anthony Deutsch and Toby Sterling; Editing by Amrutha Gayathri/Jeremy Gaunt