Delhaize

Delhaize

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140827 Delhaize | The Lion awakening 140827 Delhaize | The Lion awakening

No. pages 55
Description

Following net store closings Delhaize's platform in the US enjoys stronger economic fundamentals and competitive positions than previously, although we see further opportunities to cut the tail. In addition, the operational steps taken since FY11 have resulted in tangible improvements in terms of top-line growth. We believe margins are bottoming out and expect margin enhancement in the medium term. Valuation multiples are still far from demanding in our view. Hence, we clearly see further share price upside.

Contents

Summary and Conclusions
1. Introduction
2. Delhaize's current platform a stronger one
2.1 Current platform enjoys stronger fundamentals than previous one
2.2 Large number of different players in Delhaize's areas
2.3  Main players in key areas of Food Lion and Hannaford
2.4 Local details ultimately matter
2.5 Food Lion top player in key areas, but still has a decent, fat tail
2.6 Solid and attractive positions for Hannaford in the Northeast
2.7 In conclusion
3 Addressing the challenges
3.1 Steps taken so far
3.2 Results so far encouraging
3.3 Delhaize's sales growth has been picking up and exceeding inflation
3.4 Delhaize's sales growth also picking up versus selected peers
3.5 Passed the bottom in terms of operating margins?
3.6 Improving sales densities, although more work to do
3.7 In conclusion
4 Never a dull moment in US retail
4.1 Clear winners and losers
4.2 Major deals in overview
5 What's next?
5.1 Encouraging signs
5.2 New management team takes momentum
5.3 Further share price potential
5.4 Valuation far from demanding
5.5 Limited downside and sufficient upside for Delhaize
5.6 In conclusion
Appendix A: Platforms Delhaize America and selected peers by state
Appendix B: Platforms Food Lion & Bottom Dollar by metropolitan area
Appendix C: Platforms Hannaford by metropolitan area
Appendix D: DCF
Appendix E: P&L FY14-20E

150128 Dutch On-line Food Retail | despite all, too material to ignore 150128 Dutch On-line Food Retail | despite all, too material to ignore

No. pages 36
Description

In-depth report on the Dutch food-retail grocery market and industry featuring Ahold and Sligro

On-line grocery in the Netherlands will grow as at least specific customer segments (B2C and B2B) increasingly want it, despite their overall reluctance to pay fees. From supply side, not only supermarkets but also existing and emerging providers within and beyond the traditional at-home and out-of-home channels are expanding their on-line offering which further reinforces on-line's development. Although we do not believe on-line's penetration in food will grow to double digit shares witnessed in non-food, there is considerable upside from a still low base.

We believe penetration rates of 4-5% and 5-7% by 2020 mentioned by Ahold and EFMI respectively make sense, like Jumbo's most recent estimate of 3-5% penetration at company level by 2017. Assuming supermarket sales will grow by 1-2% annually total industry sales will reach an estimated EUR 36-38bn by 2020. A 4-5% sales share for on-line, "only mid single digits", suggests that on-line grocery will reach a very broad EUR 1.5-2bn range and imply CAGRs for on-line of 27-33%. Such market sizes and growth rates are both material and attractive.

Against the back-ground of an increasingly maturing supermarket industry, and our belief that on-line in itself does not enlarge the total, broadly defined pie of FMCG, this can only mean that on-line (grocery) is a phenomenon which food retailers have to on-board and can't miss. That participation can materialize in various ways including establishing PUPs in/near the store, remote PUPs and/or a delivery service. Despite all challenges to execute a successful on-line strategy, not participating is therefore not an option in our view.

On-line grocery does not only poses challenges but also creates opportunities. We believe that on-line initially is a way to defend one's market share with the potential to grow volume and share by better servicing existing and attracting new consumers and customer groups, amongst others by offering a broader portfolio and/or by penetrating new adjacent geographic areas. On-line can also enable retailers to more prominently market their private-label range and/or support their suppliers

Contents

Summary and Conclusions
1. Kicking off: Food-retail in overview
2. Dutch on-line grocery market meagre in international context
3. Supply side: On-line at Dutch retailers in European context
4. The Dutch consumer is hesitant, but not in denial
5. Steps and strategies of Dutch groceries so far
6. Bench-marking versus pure on-line player Ocado
7. Going forward: Becoming too material to ignore

150709 Delhaize | After the dust has settled, a bit 150709 Delhaize | After the dust has settled, a bit

 

 



    
        
            
            
        
        
            
            
        
        
            
            
        
    


                


                        

  • Summary and Conclusions

  •                     

  • Highlights of the deal

  •                     

  • Pro-forma valuation multiples not too demanding

  •                     

  • Positive performance since our company reports, most notably for Delhaize

  •                     

  • So far we have preferred Delhaize over Ahold, driven by valuation differentials

  •                     

  • Gross synergies of EUR 500m at best in line with estimates

  •                     

  • Although the targeted full retention rate is not underperforming expectations

  •                     

  • Is the 61/39% split fair?

  •                     

  • From a historical perspective no reason to complain for Delhaize’s shareholders

  •                     

  • Ultimately, it depends though on expected earnings and cash flows

  •                     

  • Delhaize’s current share price at discount to implied bid price

  •                     

  • Two approaches to determine both companies’ up/downside

  •                     

  • Method 1: Ahold upside 6-19% versus Delhaize 15-30%

  •                     

  • Method 2: Ahold upside 10-23% versus Delhaize upside 19-35%

  •                     

  • In conclusion: preference for Delhaize over Ahold maintained

  •                     

    No. pages
                
    13
    Description
                

                    

    Although we are cautious wheter the all targeted synergies can be retained, we see upside potential for the future combination and hence for both companies. We believe upside is largest for Delhaize at current share prices, also as it trades at a discount to the implied bid price.


                
    Contents
                

    160127 Dutch On-line Food Retail | online grocery initiatives accelerating 160127 Dutch On-line Food Retail | online grocery initiatives accelerating

    No. pages 40
    Description

    This new sector report features the prospects for food online in the Netherlands. Apart from Jumbo's step up, Ahold's continued market leadership, thé online story in our view was the launch of pure online player Picnic. We have seen more initiatives in recent years that ultimately failed to deliver and are no longer active. This explains our initial cautiousness. However, we do believe Picnic is at least well prepared and supported by a committed, determined and experienced team with seemingly sufficient resources.

    In this update we have dug deeper into Ocado's financial and operational performance as it provides a useful framework to assess the chances of a pure online player, like aforementioned Picnic. It might have taken time and significant investments, but Ocado's normalized EBITDA margins are ahead of those of Ahold in online grocery and those of Sligro in Foodservice Delivery. Ocado guides that further efficiency improvements can support margins, at least confirmed by our estimates. Ultimately what matters are ROIC's. Ocado's current estimated ROIC's are high single digit. However, based on some broad assumptions, Ocado's ROIC would approach, meet and exceed Ahold's current ROIC, during FY19-20E.

    We realize Ocado's operational and financial progress doesn't guarantee newcomers like Picnic will succeed as well. Also, even after more than a decade post its launch, Ocado's market share in online grocery might demonstrate its success, but its share in total grocery is still small. So, Ocado has not completely changed the grocery landscape (yet). Still, in favour of online's case, ultimately we believe it is possible to generate profit margins and ROIC's which are equal if not superior to a well established traditional grocer.

    Regarding Ahold, it continues to lead the Dutch grocery market both offline and online, while its position in non-food via Bol.com strengthens further. When completed, the merger with Delhaize will provide further opportunities to expand Ahold's online expertise. The only critical remark is online profitability. Positively, Ahold's domestic EBITDA margins remain above industry average providing ammunition to simultaneously invest and return cash to shareholders.

    Sligro's strengths and opportunities include its leading position in Dutch Foodservice, divisional EBITDA margins, its strong balance sheet, its attractive dividend yield and the announced entrance of the Belgium Foodservice market. Weaknesses and threats are Foodretail's sluggish performance and position and the aforementioned blurring of boundaries between Foodretail and Foodservice.

    Contents

    Summary and Conclusions
    1. Dutch online grocery: Supply and demand in overview
    2. Online offering per retailer in greater detail
    3. Revisiting Ocado
    4. Concluding, pure online a serious potential threat (to some)
    5. Appendix

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