Royal Ahold Delhaize NV announced plans to buy back £1 billion of shares and will plow money into online expansion as its cash reserves swell following the merger of the Dutch and Belgian retailers.
The company aims to double online sales by 2020 from £2.3 billion expected for this year, the Netherlands-based company said Wednesday ahead of an investor presentation. Free cash flow should increase to about £1.6 billion in 2017 from the £1.3 billion forecast for this year, the company also said. The stock rose as much as 2.4% in Amsterdam.
The supermarket operator’s profits have been dented by food deflation in the US, yet that headwind should diminish in the second half of 2017 as prices of milk, eggs and meat recover, CEO Dick Boer said on a call with reporters. Any inflation spurred by President-elect Donald Trump’s infrastructure spending plans could also benefit the retail industry, he said, adding it’s too early to give any specific forecast.
“In the end of the first half we may see the first signs” of deflation disappearing as commodity prices rebound, Boer said.
The company reiterated its forecast that the merger will lead to annual savings of £500 million in 2019. Ahold suspended a longstanding buyback program when it announced the tie-up last year.
Ahold and Delhaize merged in July to confront heightened competition from retailers such as Wal-Mart Stores Inc.
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