Strike Concerns Take Ahold

Ahold Delhaize stock on strike

Image source: photka, Roblan, fridhelm, Antonio Guillem, Tim UR, ChooChin, DenisNata, Picsfive - Shutterstock

What's going on?

Ahold Delhaize, one of the world’s largest food retailers, reported first-quarter results on Wednesday that were largely as investors expected – although their concerns over strikes at Ahold’s US operations dented its stock price.

What does this mean?

The Dutch-Belgian food retailer delivered sales growth of 2% compared to the same time last year, while profits grew by 1%. Notably, Ahold Delhaize’s profit margin maintained a healthy (for grocers) size of 4% – higher than that of rival European grocers Tesco and Carrefour.

Sluggish sales growth in Belgium, target-missing online sales in the US (where Ahold Delhaize makes 60% of all its revenue), and strikes by workers at US subsidiary Stop & Shop last month – in response to forthcoming reduced wages, pension cuts, and higher health insurance premiums for staff – likely all contributed to Ahold Delhaize’s stock falling 2%.

Why should I care?

For markets: Strikes are unpalatable for stock prices.

Ahold Delhaize has dished up its worst, confirming on Wednesday that its annual profit will be lower than thought thanks to last month’s strike (which garnered some influential supporters). Keeping workers happy and operations running smoothly is critical to hitting financial targets and delivering a return to shareholders. Newly public Lyft and soon-to-be-public Uber will both be keen to quash their drivers’ strikes (which began on Wednesday) in order to minimize disruption and prove the stability of their businesses to both existing and potential shareholders (tweet this).

The bigger picture: Walmart’s having a sale.

Following the collapse of Walmart-owned Asda’s merger with UK rival Sainsbury’s last month, the world’s biggest company by revenue is on the lookout for new suitors for the grocery chain. Walmart probably hopes to free up some cash – perhaps via an Asda initial public offering – in order to better compete with Ahold Delhaize as well as Amazon, which recently slashed prices (yet again) at Whole Foods.

Originally posted as part of the Finimize daily email.

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