Koninklijke Ahold Delhaize NV

AEX:AD

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, good morning, and welcome to the Analyst Conference Call on Third Quarter 2020 Results of Ahold Delhaize. Please note that this call is being webcast and recorded. Please note that in today's call, forward-looking statements may be made. All statements other than statements of historical facts made forward-looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in the statements. Such risks and uncertainties are discussed in the interim report third quarter 2021 and also Ahold Delhaize public filings and other disclosures. Ahold Delhaize disclosures are available on aholddelhaize.com. Forward-looking statements reflect the current views of Ahold Delhaize handset management and assumption based on information currently ion currently available to Ahold Delhaize management. Forward-looking statements speak only as of the date they are made, and Ahold Delhaize does not assume any obligation to update such statements, except as required by law. The introduction will be followed by a Q&A session. And views expressed by those asking questions are not necessarily views of Ahold Delhaize. At this time, I would like to hand over the call to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead.

[John Paul O'Meara]

Thank you, operator, and good morning, everyone. I'm JP O'Meara, Head of IR, and I'm delighted to welcome you to our Q3 2020 results conference call. On today's call are Frans Muller, our CEO; and Natalie Knight, our CFO. After a brief presentation, we will open the call for questions. In case you haven't seen it, the earnings release and the accompanying presentation slides can be accessed through the Investors section of our website at aholddelhaize.com. [Operator Instructions] Before I turn over to Frans, I would like to remind you of our upcoming Investor Day, which will be a virtual event held on November 15 at 2:00 p.m. Central European Time, 8 a.m. Eastern Time. We are excited to share our vision for the future and look forward to you joining us. I'll turn the call over to Frans.

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Thank you very much, JP, and good morning, everyone. Our Q3 results once again showcased the strength of our omnichannel business model. As our local and trusted brand showed resilience, building further on the 2020 COVID-related sales gains. The pandemic continues to underpin the importance of maintaining food and product supplies to local communities, a vital role that we remain focused on fulfilling. And we remain thankful for the efforts of associates who have put a consistent emphasis on safety while at the same time providing great customer service and community support. The quarter also did not come without some unexpected external challenges. Our businesses and especially the communities we serve faced disruptions from the Belgian floods, tornadoes in the Czech Republic, fires in Greece and Hurricane Ida in the U.S. But as always, our associates acted swiftly, and their dedication to their communities during these difficult times truly lived up to our core values. For that, I'm truly grateful. [Audio Gap] to meet associate, customer and community needs. And we are aware of the recent increases in infection rates in many of our markets, and we'll continue to provide assistance in all our communities, including COVID-19 vaccination efforts in the U.S. For 2021, we remain on track to deliver on our pledge to contribute EUR 20 million in COVID earmarked charitable donations, spread evenly between the U.S. and Europe. The top priority is also our continued support of COVID-19-related health and safety measures where we invested EUR 66 million in the third quarter. Now let me highlight our key financial results. Overall, we are very pleased with the underlying Q3 performance in both the U.S. and Europe as we were able to grow sales and profits on top of a very strong quarter in the end in the year ago period. We have been able to retain a strong level of underlying consumer demand by continuing to adapt to the enduring consumer behavioral changes. These strong results comes against a backdrop in which several communities across our markets reopened, suggesting that many consumer habits formed during COVD-19 pandemic favoring food at-home consumption and a focus on healthier eating are proving resilient. We have and will continue to make significant investments to address these trends. Central to this and all of our strategies is our omnichannel platform, which continued to drive strong market shares during the quarter. Our online business posted strong double-digit growth in its third quarter with these trends expected to continue. Due to the strong growth and continued Safe for Our Customer initiatives, our underlying operating margins were again very strong in the context of levels prior to COVID-19. And as a result, I'm pleased that we once again raise our 2021 underlying operating margin, underlying EPS guidance and the free cash flow guidance, reflecting the strength of our year-to-date results. Natalie will go into more detail on the third quarter financial performance as well as a detailed outlook for 2021. But first, let me move on to Slide 5 and spend a few moments on our omnichannel proposition where we continue to go from strength to strength, where this bring new, unique customer-facing experiences or evolving the speed and efficiency of our operations each quarter we are driving noticeable change. For example, our U.S. supply chain transformation continues as planned with 65% of our center store volume now self-distributed, up 50% versus last year. And we are on our way to being 100% self-distributed in 2023. We opened this week our new automated e-commerce fulfillment center in Philadelphia for The GIANT Company, which will allow us to drive increasing efficiency and productivity gains. Our GIANT Company and Stop & Shop brands in the U.S. have recently introduced new 30 minutes delivery services, including fresh, prepared foods and essential household products. Albert Heijn in the Netherlands has launched a new subscription service, Albert Heijn Premium, becoming the first food retailer in the Netherlands with a subscription plan. And to encourage healthier eating, the service offers extra savings on the wellness products as well as discounts on our bol.com and Gall & Gall subscription programs. And in Q3, our brands in Central and Southeastern Europe have expanded their online grocery delivery services. For example, Greece has expanded to another 3 cities. And the Czech Republic has significantly expanded their online offering to 350,000 people. This all serves to underpin our relentless focus to be the industry-leading local omnichannel retailer in all of our markets and by capitalizing consumer changes through our unique fresh, healthy and private brand assortments as their local and trusted online and off-line destination to drive retention, acquisition and increasing share of wallet over time. Moving on to our regional performance. Slide 6 highlights some of our key achievements in the U.S. The third quarter U.S. online sales grew by 53%. Bolstered by the continued expansion of our click-and-collect capacity as well as our FreshDirect acquisition. Speaking of click and collect, we opened 102 additional click-and-collect locations during the quarter and remain on pace to end 2021 with approximately 1,400 click and collect locations, up from 1,100 at the beginning of this year. We also remodeled 11 additional Stop & Shop stores in the third quarter, bringing the total number of stores remote since the inception of the program to more than 110, and we continue to see solid sales uplift from our remodeled stores. Finally, from a brand perspective, I'd like again to call out Food Lion, our fastest-growing brand in the U.S., which achieves its 36th consecutive quarter of positive comparable sales growth. And in addition, the 71 recently added stores in early 2021 has now been fully integrated and are exceeding sales expectations. Slide 7 highlights some of our key achievements in Europe. Our Benelux ecosystem continued to perform well, and we gained market share in the region during the quarter. This was driven by strong marketing campaigns and continued solid execution of our health and sustainability activities. We were encouraged by the 19.2% growth in net consumer online sales at bol.com during the third quarter, which came on top of the almost 46% growth in the year ago period. The number of third-party sellers on the platform also continues to grow and now stands at 48,000. Albert Heijn completed the acquisition of 38 DEEN stores in Q3. We expect all of these stores to be remodeled to the Albert Heijn fresh- and technology-focused format by the mid of this November. And in Belgium, the Delhaize SuperPlus Loyalty Plan, which provides extra rewards and discounts to consumers of healthy and sustainable products, continues to gain traction, providing a nice sales uplift. The program ended the third quarter with more than 2 million members in just 1 year since its inception. Moving on to Slide 8, and we continue to make progress in elevating our healthy and sustainability strategy, and I'll discuss a few of those items. bol.com, our online retail platform in the Benelux, has taken a step towards a sustainable ambition by utilizing new multi-packaging technology. And this makes bol.com the first in the world to pack with multiple custom items in one box, which means we have a faster and more sustainable process and fewer delivery trips and thereby, reducing bol.com's overall CO2 emissions and making us more cost-efficient at the same time. Following the success of its SuperPlus program, Delhaize has added a healthy membership program for companies, which provides discounts on healthy products with NutriScore A or B at Delhaize Belgium. And this allows us to introduce more healthier eating to these employees by providing a special discount, but also extended Delhaize reach to new customers who hadn't previously shopped our brand. And in September, our Albert brand was recognized as the leader in organic own brand products by customers in the Czech Republic. And this is, in turn, strengthening Albert's proposition with customers and is driving market share gains at the brands at the same time. All in all, our continued efforts have been recognized by MSCI, which upgraded our 2021 ESG rating from AA from our previous single A rating. We are proud of this achievement as MSCI is the most widely used ESG benchmark by our investors. And our progress here reflects our ambition to be an ESG leader, and we will continue to work hard towards this goal. Finishing on that very positive note, let me now hand over to Natalie.

[Natalie M. Knight, CFO & Member of the Management Board]

I'm also very proud to share another quarter of strong results. Ahold Delhaize teams around the world remain focused and disciplined. And our strong local brands, our scale and our robust business model are providing plenty of resilience as we face heightened pressures from the macro environment, be it from rising COVID infections, inflation or continued global logistics and supply chain disruptions. Our third quarter was strong across the board, in particular, with our brands sustaining their positive sales momentum. Net sales grew 4.6% at constant exchange rates to EUR 18.5 billion. Group comparable sales ex gas increased 1.7%, building on a healthy group comp sales growth of 10.5% in the year-ago quarter. Importantly, within that figure, Q3 net consumer online sales grew 29.2% at constant exchange rates, including overproportionate growth in the U.S. as well as in Europe for both the food and the bol businesses. Group underlying operating income increased by 0.7% at constant rates in the quarter to EUR 812 million with underlying operating margin down 20 basis points to 4.4% at constant rate. Put in the context, however, of last year's record results, we again clearly leveraged our strong top line and Save For Our Customers initiatives to deliver a result that came in ahead of expectations. Underlying income from continuing operations grew by 4.1% and to EUR 547 million in the quarter. And we repurchased 7.7 million shares for EUR 207 million. As a result, diluted underlying EPS was EUR 0.53, up 8.1% at constant rates compared to last year. Slide 11 shows our results on an IFRS reported basis for Q3 as well.Now moving on to Slide 12. Let's take a closer look at our comp sales trends on a 2-year stack basis in a little more detail. In Q3, we posted a 15.3% and 7.3% 2-year comp sales stack in the U.S. and Europe, respectively. On Chart 13, you can see that after we adjust for the influences of weather and calendar, our sales trends are even stronger than those reported figures in those regions. So we have not just maintained, but clearly, we've built on the momentum in 2020. This underlies not only the stickiness of new consumer behaviors, which Frans already mentioned, but also clearly demonstrates that our brands continue to execute very well in this food environment. From a regional perspective, we posted a 16.1% adjusted 2-year comp sales stack in the U.S. in Q3, including adjustments for weather and calendar. This is an acceleration versus full year 2020 as well as Q1 and Q2 stack 2-year comp numbers that were 14.6% and 15.9%, respectively. In Europe, the adjusted 2-year comp stack was -- in Q3 was 7.8% after adjusting for flood in Belgium and other weather and calendar shift. While decelerating versus previous quarters, the Q3 adjusted 2-year stack figure remains visibly above the pre-COVID growth rate due to market share gains for our Benelux brand as well as a rebound in several of the Central and Southeastern European countries, which were more challenged for much of the past year. Moving on to our third quarter performance. [indiscernible] Chart 14, net sales in the U.S. grew 6.8% at constant rates to EUR 11.5 billion. U.S. comp sales ex gas were up 2.9% against a tough comp of 12.4% in the year ago quarter. It also should be noted that the Q3 comp sales were negatively impacted by 0.8 percentage points due to calendar shifts related to the timing of the 4th of July holiday. With respect to net consumer online sales, revenues grew 52.9% in constant currency, driven by increased click-and-collect capacity as well as our FreshDirect acquisition. Excluding FreshDirect, our U.S. online sales business grew at 26.2% in Q3 even as we lap triple-digit growth in the year before period. The step change in the way many consumers shop favoring the convenience of online purchases is becoming more clear with each and every quarter that we trade through. Our unique and brand-specific omnichannel offering is having a positive and sustainable effect on our U.S. business. Our U.S. underlying operating margin in the U.S. was 4.8%, down 20 basis points from the prior year at constant exchange rates as margin lapped record Q3 levels from 2020. Nonetheless, Q3 2021 U.S. underlying operating margin was very strong within the context of pre-COVID levels due to continued strong sales leverage. In Europe, net sales in the third quarter grew by 1.1% to EUR 7 billion, and comparable sales were stable versus the prior year. Sales benefited from market share gains at several of our brands as well as further growth at bol.com. It should be noted that Q3 Europe comparable sales were negatively impacted by approximately 40 basis points due to the floods in Belgium. Net consumer online sales in Europe grew 20.1% in Q3 on top of 48.6% growth in the same period of last year. At bol.com, our online retail platform in the Benelux, net consumer online sales grew 19.2% in the quarter. This includes a 24.6% increase in third-party sales as we continue to expand our position as Benelux's leading online marketplace. Underlying operating margin in Europe was 4.3%, flat versus the prior year at constant exchange rates as the strong execution of cost savings programs offset rising cost pressures. Moving on to Slide 15. Free cash flow in the third quarter was EUR 516 million, which compares to EUR 176 million last year. This development was impacted by working capital improvement, lower taxes and most importantly, higher operating cash flows. Now turning to our outlook for 2021 on Chart 16. While recent trends with COVID-19 and a choppy macro environment continue to create significant uncertainty, the strength of our brands, our deep customer relationships and excellence in execution have once again allowed us to over-deliver relative to our expectations in the quarter. As a result, we're raising our full year 2021 underlying operating margin, underlying EPS and free cash flow outlook. We continue to expect the comp sales trajectory to be on a 2-year basis in 2021 -- to be better on a 2-year basis in 2021 compared to pre-COVID 2019 -- COVID-19 levels. And while it doesn't affect our comp sales, our Q1 acquisition of FreshDirect as well as stores from Southeastern Grocers, along with the Q3 acquisition of 38 stores from DEEN supermarkets, are providing us with additional incremental sales. We're raising our underlying operating margin outlook to approximately 4.4% versus the 4.3% we had previously, reflecting the strong year-to-date margin performance. This margin outlook continues to embed over EUR 750 million of Save For Our Customers savings initiatives, which have offset cost pressures related to COVID-19 as well as the earnings dilution from increased online penetration. As a consequence of the higher margin, we are raising our full year 2021 underlying EPS outlook, which is now expected to grow by low to mid-20 percentage point rate versus 2019. This is up from our last guidance that was high-teens growth versus 2019. We're also increasing our free cash flow guidance to approximately EUR 1.7 billion compared to prior guidance of EUR 1.6 billion. The upgraded free cash flow guidance is driven by our increased underlying operating margin and underlying earnings forecast. The guidance includes our commitment to increase our annual investments in our digital and omnichannel capabilities, which are current and future growth drivers for this group and very important to us. Lastly, we're on track towards growing our 2021 full year dividend predicated on a 40% to 50% payout ratio on underlying earnings. And we remain committed to our EUR 1 billion share repurchases during 2021. As we get ready to close this year, we're proud of our accomplishments. Our business is in great shape. We're ready for the opportunities and challenges ahead. With that in mind, Frans and I are looking forward to speaking to you more about our strategy, outlook, key initiatives across the brands and regions at our Investor Day this coming Monday. But for now, we're ready to take your questions related to the Q3 results. So operator, would you please open the line for questions.

[Operator]

[Operator Instructions] And the first question is coming from Mr. Andrew Gwynn, Exane BNP.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Two questions, if I can. So firstly, logistics, obviously, we've seen quite a lot of inflation kicking around there. Considering finding where we're at, is it a significant challenge? And then also, particularly on bol, are we seeing any potential availability challenges? And then the second question, I appreciate it's probably about 5 questions. But second question, just thinking more generally, clearly, another very strong period for trading on the 2-year stack basis. Do you think those gains can hold into next year? I appreciate there's market share gains, there's a bit of inflation in there. But on the broader volume point, do you think you can hang on too much of that into 2022?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Yes. Let me come back to your question on logistics and supply chain and then on market share later on. I think for our European markets, we see a pretty normal supply chain at this moment. And we are very well prepared for the festive season, both in our food businesses as well as bol.com with the marketplace and platform. So we feel confident that we have a robust and reliable season for our customers. In the bol.com logistics scheme, it helps when customers are a little bit earlier buying their presents for their friends and family. But we are well prepared. And of course, we are already working on that scheme, capacity, logistics and working with our 48,000 vendors. We're working there robustly to prepare the season. On the U.S., we see a little bit more challenged supply chain in the U.S. in the total industry. And that is, at the moment, not easy. It has to do with the offer of labor L&D costs, but also factories and manufacturers which were challenged by the labor factor. Our teams do an immense job to make the best possible for our consumers. But also there, talking about the festive season, we are well stocked for the special products and the daily products. We also feel that in the U.S., we will have a robust offering for our customers to have a good celebration with the family and friends. On market share, I think we -- hopefully, we have, in the meantime, made clear that we have a strong omnichannel positioning in our group that our brands are well positioned with leading market shares in their markets. That COVID helped the trust factor and the reliability of our brands and the proximity of our brands, the local brands to their communities. That's why we're pretty confident that also going forward, we are well positioned to gain market shares.

[Operator]

And the next question is from Mr. Nick Coulter, Citi.

[Nick Coulter, Director]

Firstly, in the U.S., could you talked about the shelf less inflation in the quarter, your thoughts going forward and whether the competitor sets are being rational in passing that through or if there's any kind of differential activity. And then secondly, in Belgium, where, I guess, there's a little more promotional activity. Could you talk about the trends you're seeing there and whether you expect that competitive activity to normalize.

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Yes. Let's -- we talk -- there's a lot of talk about inflation at the moment. And we talked about it in the last quarter as well. We gave you the last quarter also the CPI data for the Northeast, which went up to 3% in the Q3, coming up from 2.6% in the Q1 and 0.1% in Q2. So yes, there is inflation. And we also think that there will be a little bit more inflation in the fourth quarter. At the same time, we have the task to manage this in a proper way with our negotiation with the national brands, with our strength of our private label and own brands to make sure that for consumers there is the best possible offer.

[Nick Coulter, Director]

But that was also being passed through, Frans? There's no kind of -- you're seeing an orderly market?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

That's the second part of the answer is that the markets are, at the moment, very rational. So when price increases are legitimate, we think that we can pass them on, and that's exactly what we do. In Europe, the price inflations are lower than in the U.S. In Belgium, you talked about promotion levels, it's a rather flat inflation level in the Netherlands. It's is roughly 1%, 1.5%. So still manageable, maybe a little bit more inflation in the fourth quarter. But I think we know how to deal these kinds of things I think for a customer, of course, every dollar is one dollar more, so we negotiate hard. But I think it's a digestible inflation for consumers. And for us, we pass it on when it's a legitimate.

[Nick Coulter, Director]

And in Belgium, it seems like that was a competitive market in the past couple of quarters or more competitive. Is that your sense?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Yes, it's still very competitive in the Belgian market. That's why you also see inflation levels which are roughly flat, which are lower than -- slightly lower than the Dutch market and a bit lower than the U.S. So competitive markets. At the moment, we gained market share in Belgium. So I think we do the right things there.

[Operator]

And the next question from Mr. Rob Joyce, Goldman Sachs.

[Robert Joyce, Equity Analyst]

Just following on from that, I guess. If you could help us understand the gross margin dynamics in the quarter. It looks like they fell in the third quarter, having been up quite strongly for about 6 quarters, actually help us understand that.

[Natalie M. Knight, CFO & Member of the Management Board]

This is Natalie. I will talk about the gross margin. We're actually pretty impressed with our gross margin in the third quarter that if you look at the development of that, what you see is it has been stable, particularly in the U.S. And that's something that shows the strength of our business as we've been going through those different dynamics in the period. I think what you see in the margin is that there have been different cost pieces coming into our margin. But on the gross margin side, we've had good strong development that continued in the third quarter.

[Robert Joyce, Equity Analyst]

Okay. Am I reading it wrong? It just looks like it's -- the development is below the second quarter by quite a bit or am I just missing that?

[Natalie M. Knight, CFO & Member of the Management Board]

If you look at it versus the prior year, I believe the number is still quite stable.

[Operator]

And the next question is from Xavier Le Mené, Bank of America.

[Xavier Le Mené]

Just one, actually. Question is, are you able to measure the loyalty in the U.S. and in the Netherlands with the customers, especially going to more normalization post pandemic, just to understand a bit more what the average basket is doing, the footfall, whether the consumer is trading down or up in the kind of reopening world?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Xavier, you're a little bit faint in the background volume-wise, but I think I got your question. You asked a little bit about loyalty, footfall and baskets in the U.S. and in Europe. We see in Europe that we gained market shares and also we're gaining still market shares in the Dutch market, both with the food brands, but also the bol and the same for Delhaize in Belgium. So that means that our offering is very competitive. And we see that if you look at the offerings that -- in our stores, we have all type of customers, all type of wallets, I think the right assortments. We stepped up quite a bit in the Dutch market our price favorite assortment, which is the price entry assortment. That's doing extremely well. So that's also a big boost for our price positioning. And that is helping baskets. That is helping loyalty. And we also introduced this Albert Heijn Premium product, which is a subscription model, and also our loyalty products and our loyalty systems are doing very well. And I think we are the most innovative from a digital perspective also in both the Dutch and the Belgium market. In the Belgium market, talking about loyalty, we connected now the NutriScore, which is this health navigation label together with discounts. So the healthier you buy, the more discounts you get. 2 million members in the program already, which is sensationally a number much better than before. So also there talking about digital, loyalty and people who shop our brands, I think we're doing very well. In the U.S., overall, amongst the food retailers, we gained share also in the third quarter. And also there, you see our omnichannel presence. We grew our omnichannel sales again. We've grown now faster with our click-and-collect services there, with our delivery sales, which is not only margin-accretive, but shows also how many customers are still coming to our stores to pick up their merchandise. So I think overall, we see a very positive response of customers to our increased loyalty systems in the U.S. We see that we get -- that we are very consistent in our pricing and price perception and for Stop & Shop that is even improving. So I'm quite happy with the developments at the moment.

[Xavier Le Mené]

Okay. And just a quick follow-up, have you seen potentially the consumer trading down or up in the recent weeks, I would say?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

No, we have not seen that yet. But I think -- but that's logical when, for example, COVID hits or we have a very different economic -- macroeconomic outlook, that might change. But at the moment, we don't see this. I think people are preparing for the festive season. At the moment, we have a strong consumer in the U.S. on all levels of society, supported by governmental programs. We see strong consumer spending, strong consumer overall. And also in the Dutch market here, we see that with typology of customers, I think we see that also our baskets are getting stronger and our loyalty is getting better. And it has to do with a good assortment. Don't forget that we see now more working from home, so that is also supportive for supermarket sales. We see that more people have chosen to cook at home, discovery, again, of cooking themselves. And therefore, I think we have the right assortments for convenience and for fresh. And if you shop our Belgium, Dutch or Southeastern Europe or U.S. stores, you see that we made a big step up during [ COVID ] in assortment of convenience, fresh and healthy. And I think that has the effect at the moment, combined with our omnichannel offering.

[Operator]

And the next question is from Ms. Fabienne Caron, Kepler Cheuvreux.

[Fabienne Caron, Head of Food Retail Sector]

Two quick ones from my side. The first one, can you tell us how you deal with wage inflation in the U.S.? Do you see more pressure from your employees, the unions? Or do you see higher turnover? And the second question would be on quick [ commerce ] we've seen recently more and more food retailers making collaboration with Gorilla, [indiscernible] and the others. But I don't think we've seen anything from your side. So it would be interesting to have your thoughts on it.

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Taking the first, Natalie and I'll take the second.

[Natalie M. Knight, CFO & Member of the Management Board]

That sounds good. I'll start with the question on wage pressure and everything that's happening on labor in the U.S. It's definitely a hot topic for us in the U.S. And you see that it's particularly an issue on the supply chain side. But what I would say is if you look at this, what you see is, I'll say, the strongest places where we're feeling the crunch the most are when it comes to transportation, distribution. I think we're doing a great job of maintaining that in-store presence. We've had things where we went out and we needed to recruit. We told you earlier about getting 8,000 people in a day for Food Lion when we needed it. I think one of the fundamental differences for our industry versus others is a lot of people were laying people off during COVID. We were putting people in jobs. And so when we look at that piece, we're starting from a better position. There are wage pressures, and it's something we're very cognizant of across the board, whether it's Europe or the U.S. They don't seem to be outside of the range of normal inflation. But it is something where we're paying special attention to it, especially in some of those very critical positions for us as we go forward. On to the new collaboration front?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Yes. Thanks for the question, Fabienne, and you know us already for a long time. So you have seen us over time being very early and innovative with all kind of omnichannel type of formats and where we made big steps from next-day delivery to same-day click-and-collect and still have a very strong delivery business as well. We also mentioned we also moved in a number of markets already 30 minutes, 1-, 2-hour type of delivery. And of course, we also follow that instant delivery model, which we see in Europe, but also in the U.S. We originated -- we also follow that, of course, very closely. We check all those customer journeys, and we see what is the best added value for customers. We try to size that market. We try to size which type of customers. We also look at the profitability by the way, of those models or the lack of profitability. So we follow those models very carefully. And we monitor the viability if we would add such a service to our portfolio, yes or no, and we are in that process now. So I think we are fully aware it's a relatively small market at the moment. But you see that the time element of our own omnichannel business has also got much more, let's say, much shorter in these times. So we follow this very closely. And when we make some steps there, we then -- then we would let you know.

[Operator]

And the next question is from Mr. James Grzinic, Jefferies International.

[James Robert Grzinic, Equity Analyst]

Just had a quick question. Frans, you seem to become more comfortable that these changes in consumer behavior in the U.S. are becoming entrenched from a couple of things that you said and also some of the things you're saying on the press release. Firstly, is that impression right? And if it is, why are you becoming more comfortable with that sustainability of the change in behavior?

[Natalie M. Knight, CFO & Member of the Management Board]

I'm happy to hop in on that one for just a second because I do believe we feel very strongly and there is a change in consumer stickiness that is really taken from our learnings during the pandemic. And I think on the one hand what that means is that we've been able to, I think, capture some of those changes in behavior. So as people are eating, shopping, working more from home, what are the new opportunities for us with new food solutions, with new -- different products, different availability for our consumers. But it's also something where I think the way that our business is set up in the U.S. where we have high-density stores -- or a higher density of stores where we have sometimes a smaller footprint than some of our peers where we've really come in, be able to mean more to those consumers. So that's a place where I think, on the one hand, what you've seen is some changes in behavior. That are positive for us. And that people want to eat healthier, people are doing more at home, we're seeing all of those trends that really help to a strong food retail position. And then the second one is because of the service and then those structural issues in terms of how our stores are positioned, I think those are things that we have been able to capitalize on and expect to continue to do.

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

And just to add here, our private label offering also got better. And also we grew private label share, which where we can differentiate ourselves if it's price points or offering or reformulation. And the other thing, and it sounds a little bit emotional, but during COVID, I think a lot of families and communities were challenged from a health perspective. And I think there, we also gained a lot of loyalty and trust from communities because we are so close to the community. We know those people very well. We employ a lot of people from the communities. But we also have a very strong relationship on keeping communities going. And I think we supported a lot of people and communities in these kind of very difficult times. If it's charity, it's food donations, if it's food programs, if it's information and navigation to eat healthier and to change your lifestyle to your benefit. And I think that created a lot of extra connection with our great local brands, with those local communities. And that element of trust, I think, is also paying out now.

[James Robert Grzinic, Equity Analyst]

Can I perhaps press you more on that point. I understand that there's a clear correlation between density of distribution and people moving around less helping you. I'm just wondering whether in recent months that people -- particularly mobility in U.S. has not recovered. Do you feel more comfortable that they will continue to behave that way next year and beyond? Did that confidence has changed in recent months?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

No, but I think that's what Natalie rightfully said, the stickiness of change behavior, we see that everywhere. And working from home, the healthier wishes on food, convenience meals, cooking at home. And let's not forget, I think a lot of people who were forced because of the out-of-home market was closed down to prepare their meals at home, they learned a lot. But they also saw you can have a very healthy meal, conveniently cooked at pretty low price compared to out-of-home. The out-of-home market in the U.S. is much bigger than in Europe shares. So if the market bounces back, then there's also a bigger effect in the U.S. for supermarket sales if people eat more from home than they used to do in the past, a bigger effect than in Europe. And we think that those effects are sticky. And that, combined with our omnichannel presence, so that you make it very easy and much easier if it's click-and-collect or a pick from store, all this kind of business formats. I think that whole proposition is fitting to what customers behaviorally are changing at the moment. And we think that, that will stay for a big part. I don't know where you work at the moment. But if you now work from home, then you have -- you take your breakfast and your lunch. And I think that working from home will also be a very sticky effect not only in the U.S.

[Operator]

And the next question is from Ms. Maria-Laura Adurno, Morgan Stanley.

[Maria-Laura R Adurno]

Most of my questions have been answered. I was just wondering perhaps if you can remind us, how many times a year you have negotiations with suppliers that are happening in Europe? So that would be the first part of my question. And the second part, maybe perhaps if with respect to your European market, if you can talk [indiscernible] like what type of dynamics are you seeing from a price and promotion standpoint? Is it becoming more inflationary? Or are some of those markets still in very much in deflationary?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

So Natalie, if you take the second one, then I will take the first one. The negotiation cycles with our suppliers, classically, traditionally and a couple of years in business, then you had a 2-year -- twice a year cycle in the U.S. You had a 1-year cycle with the big annual negotiations in Europe, and that's a little bit how it traditionally was organized. But I think those things are changing. We still have 2x a year overall negotiations on the commercial plans in the U.S. And we still have those annual negotiations in Europe. But in the meantime, I think it got more fluid. And especially, if you look at, of course, at the fresh categories, fruit and veg and produce and meat, that is weekly or sometimes a daily affair for the center store. It's more towards annual negotiations. But also there, of course, with the market positions we have, with the #1 and 2 positions we have -- we are, if necessary, we're every month or every week with our vendors to see -- to interpret raw material prices, packaging and plastics and these kind of things to see that we get the right and the best possible cost of goods. So it got more fluid. But traditionally, we had 1x a year in Europe and twice a year in the U.S.

[Natalie M. Knight, CFO & Member of the Management Board]

And on your question about pricing and promotion in Europe. What I'd like to say on that one is just that we are in a period where Europe has become a lot more stabilized post-COVID than what we've seen in the U.S. So you are seeing, I'll say, pricing more at normalized levels. Happily, the inflation levels have been lower here than they've been in the U.S. So that's a place where we've been able to really shield our consumers from price increases in the last quarter. But it also is still, I'll say, higher promotions than where we saw previously this year, but still significantly below, or I'll say below what we've seen pre-COVID. It is something that's more normalizing. Expect the European markets to be something where I think there is a higher price sensitivity at the moment because there's just a lot less stimulus in these markets than what we're seeing in the U.S. But it is something where in terms of pricing, it's, I think, been a very rational environment here as it has been in the U.S.

[Operator]

And the next question is from Mr. Andrew Porteous, HSBC.

[Andrew Ian Porteous, Analyst, European Retail]

A couple from me. First off, just in terms of the upgraded outlook that you published today, can you just give us an idea on what you're expecting in terms of sales trends through Q4? And what you're seeing in Q4 to date, if that's possible? And then second question, I guess just more on the competitive environment in the U.S. I mean during times of sort of inflation, supply chain volatility, et cetera, you normally see, I guess, the gaps between winners and losers open up there. Are you -- is your outperformance versus the market accelerating? Are you starting to see different metrics in terms of availability versus competitors and things like that improve? Perhaps give us some color around that.

[Natalie M. Knight, CFO & Member of the Management Board]

Maybe I will start on that one, which is how are we seeing things in terms of the sales outlook. Well, you know we don't give you that one in terms of on a forward-looking basis. What I can say is that when we look at the third quarter, we did see inflation starting to take a little bit at the end of the quarter. So in terms of sales growth over the quarter, we had a little bit of a sequential improvement. And when we look at the outlook or what we've seen, I'll say, in the beginning of this period, those trends have continued. So there's a lot of fluidity in the market when we look at things of COVID between now and the end of the year, but we're very pleased with the development. And I think in terms of the outperformance versus the U.S. competitors, that comment, I think what we were talking about there was really on the supply chain and being able to get those products. That's something where we've been, I think, very diligent. You know that we're in the process of bringing in our supply chain. We've gone from this year, as Frans mentioned it in his prepared comments, that we now have 65% where it's all in our own control. We're very active. That means we're much better able to control availability, have the conversations with CPG companies ourselves than we were a year ago. And I think the other piece that's very important is we are a company that is great with processes. We're super operators, and we plan ahead. And so we knew that there was going to be issues this year around holiday and making sure we were in a good position. So that's a place that we have prepared for. And we have -- we think we're in a strong position to make sure all of those holiday essentials are ready as we come into the fourth quarter. And that's something that I think is -- may differentiate us from some of our competitors.

[Operator]

And the next question is coming from Mr. Fernand de Boer, Degroof Petercam.

[Fernand de Boer, Research Analyst]

It's Fernand de Boer, Degroof Petercam. Also a couple of me. Going back maybe on the previous question, if you look at your fourth quarter 2019 EPS and if you look now at your guidance, how conservative are you in that guide? Because I look at EUR 0.52 in 4Q 2019. That's the first question. And to come back on the stickiness of this COVID sales. In the press release, you said, okay, you're continuing to make investment to address that trend. Is there anything that you are going to do differently going forward in that respect? Because that's a little bit my conclusion from that comment. And where do you expect them to step up your investments? So -- and then the last question on the pricing and difference in inflation in Europe versus the U.S. And bit comment as you say, 2x cycle in the U.S. and onetime cycle in Europe. Is that also one of the reasons what explains this difference in food inflation that most likely we could expect more inflation next year in Europe and maybe a little bit less in the U.S.? Those are my questions.

[Natalie M. Knight, CFO & Member of the Management Board]

So let me start with your EPS question, and then I'll pass over to Frans. This is one that the real answer on Q4 is just that last year, we had a 53-week year. And this year, we've got a 52-week year. So if you take that 53-week impact, sales were up by $1.2 billion, 7%. The UOP margin was enhanced by 20 basis points. And our EPS actually had a 6% positive impact as a result of that. So if you look at our numbers on a comparable 52-week basis, I think that's probably where you were going. I was just going to say, if you look at that, our guidance implies that we're going to have at least mid-single-digit EPS growth on a like-for-like basis, and I can confirm that.

[Fernand de Boer, Research Analyst]

Compared to [2019,] 4Q 2019?

[Natalie M. Knight, CFO & Member of the Management Board]

No, I'm sorry, that's compared to 2020.

[Fernand de Boer, Research Analyst]

Yes. Okay.

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

So on the -- Fernand, on the question on stickiness and change of behavior of customers, how well are we prepared, what have we done on these kind of things to address that opportunity? And of course, we all know that, that opportunity came through COVID, which is not -- which is a sad reason to talk about an opportunity. But customer behavior changed quite dramatically, I think, and it will stick. We don't -- we see this working from home. You see this with how you work with your virtual tools. We see our consumption from home going up. We see an increased online demand. And those are all areas, I think, we very well understood. We are already a company with high fresh, convenience and the level of health. 51% of our total own brand sales is healthy. So we have a very good starting position and high credibility with consumers to be active in this space. And we stepped up dramatically. If you look now at the Albert Heijn and Delhaize assortments, we stepped up dramatically in ready meals, ready-to-cook, ready-to-heat and ready-to-eat. We stepped up in products which are healthier and better reformulated. We did a lot of work in the last couple of years. But also in the U.S., if you now go into the remodel Stop & Shop stores, you see more ready-made meals. You see more delicatessen. You see more kitchen. You see more convenience. And also the American consumer, they eat more from home and not only the breakfast and the lunch because of working from home. So we see those trends. We invested in our kitchen, our own meal kitchen, for example, where we prepared those meals. And we -- on Rhode Island, we invested in the assortments. We invested also in Food Lion with a big step-up in kitchen, delicatessen and the deli departments just to service all these kind of requirements. And we see that, that is happening. We see that we can sell those product well. We invested in those products. But those are normally products with a good margin profile. So I think we are ready for that or a move and not only store-wise, but also omnichannel-wise with our online services. So you saw our online numbers going up. We will be -- we indicated already 70% growth in this year in the U.S. online, and we're going to make that number. And I think we have much more to tell about this topic when you can find some time coming Monday to be with us in our Investor Day. And then I think we will get a lot of pretty cool information how we would like to see that we use this trend and that we are ahead of the game and that we have a very competitive offer.

[Fernand de Boer, Research Analyst]

Okay. And the last question on the difference in the U.S.-Europe cycle impact on inflation?

[Frans W. H. Muller, President, CEO & Chairman of Management Board]

Impact on inflation, because we said already the inflation levels in the U.S. and in Europe, the difference and how we explained that, we already gave you some information there. We also said that both in the U.S. and Europe, we see a little bit more higher inflation in the fourth quarter, but it still will be digestible and relatively moderate. And we manage this very carefully with our economists, with our [should-cost] models. So I think we are on top of it, and it's manageable for us at the moment. It's our interest, of course, to keep those prices as low as possible for our consumers.

[Operator]

There are no further questions.

[John-Paul O'Meara]

Thank you, operator. So that completes our call for today. As Frans just said, we're looking forward to seeing you all on Monday. If there's any other follow-up questions, the IR team is, of course, available for taking any questions throughout the remainder of the day, and we see you on Monday.