Ahold Delhaize's Profit in Q1 Ahead of Consensus With Higher Guidance but Free Cash Flow Unchanged

Koninklijke Ahold Delhaize released first-quarter results with sales up 8.3% at EUR 19.8 billion (up 3.6% at constant-exchange rates), ahead of company-compiled consensus (EUR 19.455 billion). Comp sales growth was up 3.3% and down 3.1% for U.S. and Europe respectively, versus up 3.7% and down 2.7% growth estimates for company-compiled consensus. Online sales declined 1%, primarily the result of tough first-quarter 2021 comparables (up 103.3%) and a slowdown in bol.com (excluding bol.com, online sales were up 4.6%). The firm's underlying operating margin was 4.2% or EUR 829 million (versus EUR 778 million for consensus), up 20 basis points, mainly a function of largely noncash insurance gains. In terms of guidance, the group now expects EPS "to be comparable" with 2021 versus a "low to midsingle digits" decline previously (down 4% in our model and down 2% for consensus). The firm continues to expect EUR 1.70 billion in free cash flow versus EUR 1.65 billion in our model. Finally, Ahold Delhaize reiterated increased capital expenditure guidance at 3.5% of sales at the group level with 0.5% earmarked for investments in bol.com. Despite our EPS estimates for fiscal 2022 being somewhat lower than fresh guidance, we don't expect to materially change our EUR 24.50 fair value estimate (other than the time value of money) as free cash flow guidance was unchanged and in line with our estimates. Shares are slightly overvalued.