Stop & Shop still feels the sting of an 11-day strike in New England in April, with executives of the supermarket chain’s Dutch parent company telling industry analysts Wednesday it has lost customers and increased sales are coming from other subsidiaries.
Ahold Delhaize, the Netherlands-based retail giant, posted U.S. sales in the third quarter of $11.4 billion, up 2% from the July-to-September period in 2018. The company characterized sales as strong compared with last year’s third quarter when shoppers stocked up on food and groceries ahead of Hurricane Florence that hit the Carolinas in September 2018. Ahold operates Food Lion supermarkets in North Carolina and South Carolina.
But the strike seven months ago by 31,000 Stop & Shop workers continues to be a drag. Asked on a conference call with industry analysts if it’s “fair enough” to say the supermarket chain’s market share is flat or declining, Chief Executive Officer Frans Muller said, “Yeah, it has been going down, but that was, of course, partly strike-related” and began before the strike.
“As you know, we were not happy with the trend,” he added.
Ahold posted “particularly strong sales” at Food Lion and Hannaford, though Stop & Shop operated in a “challenging sales environment, even with the strike behind us,” Muller said. He said Stop & Shop has returned to its pre-strike levels “and we will also see in the fourth quarter improving customer counts.”
Chief Financial Officer Jeff Carr said the performance at Ahold’s U.S. businesses “was very strong across most of our brands, especially at Food Lion where we continue to see good volume growth and market share gains, and that was somewhat offset by Stop & Shop.” The “underlying operating margins” of 4.4% in the U.S. were strong, but down slightly from last year, specifically due to reduced sales at Stop & Shop, which he called a “key area of focus.”
Burt Flickinger, managing director of Strategic Resource Group, a consumer research organization, said picket lines that kept Stop & Shop customers out of the stores across New England took a toll. “I’ve never seen more effective picketing where literally 90 to 95% of the customer count went away,” he said.
He estimates that between 3% and 5% percent of shoppers have not returned.
Flickinger said large competitors such as BJ’s Wholesale Club and Target Corp. also are touting their use of solar energy to attract environmentally aware shoppers.
Stop & Shop last year aimed for increasingly choosy shoppers with a redesign of store interiors and an emphasis on produce, specialty items and online sales. Muller said stores in Connecticut and Long Island are “off to a good start,” with supermarkets showing improved performance.
The continuing impact of the strike may not have been a surprise. Credit Suisse analyst Judah C. Frommer advised clients in a note last week to expect slow sales recovery due to the strike and “subdued” benefits from the store remodeling initiatives.
Ahold said in August the impact of the strike on net sales was $345 million, with $224 million a result of the work stoppage and $121 million during the “subsequent recovery period.”
The impact of the strike called by the United Food and Commercial Workers union is diminishing. U.S. sales in the previous second-quarter were nearly $11 billion, up just 0.2% from the same period in 2018. Adjusting for the impact of the strike and other factors, sales were up 2.3%, the company said in August.
In the battle for public support during the strike, Stop & Shop said on its website it’s the “only fully unionized large supermarket company in New England,” requiring it to negotiate pay, benefits and work rules and endure an occasional work stoppage.
Overall, sales at Ahold Delhaize were up 5.8% for the quarter, beating Wall Street’s expectations. Shares jumped 5.4%, closing at $26.92.
Source: Hartford Courant