[caption id="attachment_94341" align="aligncenter" width="700"] *Restated
**Statutory
Source: Company reports/Coresight Research[/caption]   2Q19 Results In 2Q19, Ahold Delhaize reported net sales of €16.3 billion, up 1.5% at constant exchange rates (up 5.0% as reported) and in line with the consensus estimate recorded by StreetAccount. An 8.3% rise in selling, general and administrative (SG&A) expenses prompted a 71-bps erosion in the statutory operating margin. SG&A was driven higher particularly by labor costs, which rose 6.8%, and “other” expenses, which jumped 14.2%. Underlying operating income of €594 million was down 11.3% year over year but broadly in line with expectations. Underlying operating income includes adjustments for impairments (of €13 million), gains on leases and the sale of assets (of €7 million), and restructuring and related charges (of €27 million); the last item included €14 million of integration costs. This yielded an underlying operating margin of 3.6%. Net income came in at €334 million, down 18.1% year over year, impacted by the strike at Stop & Shop, offset by lower income taxes and higher income from joint ventures.

• US comparable sales growth ex gasoline slowed to 0.2% from 1.2% in the prior quarter, but was in line with the consensus estimate. Ahold Delhaize reported that, adjusted for an 11-day strike at Stop & Shop and Easter timing, US comp sales ex gasoline were up 2.3%. Total US sales were up 0.2% at constant exchange rates. US online sales were up 14.4%, or 18% excluding the strike impact. The company is aiming to have 600 Click and Collect points by the end of the year, and added 124 such collection points in the quarter.
• In the Netherlands, comp growth came in at 3.8% (3.1% adjusted for Easter timing) versus 2.9% in the prior quarter and expectations of 3.2%. Online sales were up 34.4%, driven by 27.5% growth at Bol.com. Total sales in the Netherlands were up 4.2%.
• In Belgium, comparable sales declined 0.2% (declined 1.0% adjusted for Easter), compared to a 2.3% last quarter and the consensus estimate of a 1.4% increase. Total sales were flat year over year.
• Central and Southeastern Europe comp growth was 3.5% (3.0% adjusted for Easter), versus 0.8% in the prior quarter and the 1.2% consensus estimate. Total sales grew 5.1% at constant exchange rates.

Management noted that the company had finalized its integration and reached its target to delivery gross postmerger synergies of €750 million in 2019, resulting in €512 million net synergies from the integration of the companies on a run-rate basis. In 2Q19, net synergies amounted to €128 million, up by €29 million year over year, driven by buying activities. Outlook Management reiterated prior guidance, including that the underlying operating margin for the group will be slightly lower in 2019 than in 2018; and that underlying EPS growth for the year will be in the low single digits, due to the effect of the Stop & Shop strike. Management reiterated expectations of group free cash flow of around €1.8 billion FY19, due to the continued business strength in the US and Europe.