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Weak Guidance Gives You A Chance To Buy Ahold Delhaize At A Discount

Bjorn Zonneveld profile picture
Bjorn Zonneveld


  • AD reported Q4 and FY2020 results before the bell on the 17th of February.
  • The company's FY2020 was good, but the guidance for FY2021 was unimpressive.
  • The move to online brings some interesting opportunities to AD.
  • There are currently three risks to the company: The end of Covid-19, Amazon, and the possible increase in minimum wage.
  • Nevertheless, shares are undervalued by at least 12%.

On the 17th of February, Ahold Delhaize (OTCQX:ADRNY) (OTCQX:AHODF) reported Q4 and FY2020 results. Even though the results over 2020 were good, share prices took a tumble. The main reason is the weak guidance provided by AD. Nevertheless, there are some very good opportunities for the company. After the decline in share price, I think that shares are trading at, at least 12% undervaluation and rate them a "BUY".

Ahold Delhaize logoSource: Company

How has the company been doing?

FY2020 was a weird year; on the one hand, we had a lot of companies closing down and working from home, while on the other hand online shopping and grocery stores were booming. AD was part of the second group and saw revenue increase by 12.8% (14.2% at a constant rate) to €74.7 billion. This was better than US peers such as Walmart (WMT) and Kroger (KR) but worse than Target (TGT). However, AD has different geography than its US peers, with around 40% of sales coming from Europe. Furthermore, net consumer online sales improved to €7.6 billion from €4.5 billion in 2019 (of which €4.3 billion from Bol.com).

Sales & online sales ADSource: Annual report

Even though the company had a record year, net income decreased by almost 21% to €1.4 billion. Due to the fact that the company had a record year, it also decided to take some pain this year. AD decided to terminate 4 large multiemployer retirement plans. Overall this is a good move due to the low exchange rate of the dollar and the lower tax rate because of the impact on operating margin. To leave the United Food & Commercial Workers International Union-Industry Pension Fund (the "National Plan") and the United Food & Commercial Workers (UFCW)-Local 1500 Pension Fund (the "1500 Plan"), AD had to pay €559 million and €183 million respectively, as well as a transition payment of €18 million. In addition to this, AD's subsidiary Giant Food agreed with unions to combine the FELRA

This article was written by

Bjorn Zonneveld profile picture
I mainly focus on stocks that are unknown by the public and REITs. As for me: I am a BBA graduate who is pursuing a Master in Finance (MSF) at Erasmus University (Rotterdam, Netherlands) and work a student job in the real estate industry. My portfolio mainly consist of dividend growth stocks and REITs. Although I do have smaller positions in growth and value (non-dividend) stocks. My largest positions are: Enbridge, Abbvie and VICI.

Analyst’s Disclosure: I am/we are long ADRNY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

Thank you for the article. I mostly agree with your thesis, but terrible 2021 guidance caught me off guard. Sold 1/4 of my position. Still LONG. Hopefully they underpromised and will overdeliver. I think your high end target is very optimistic for now.
Bjorn Zonneveld profile picture
@F vd Sanden thank you for your comment. Yes 2021 guidance was a mess and I think they severely understated what is going to happen. Obviously it is not going to be as good as 2020, but this was just very low.

My target is an estimation based on how I think the business will perform and how Bol.com should be valued. I might be a tad too optimistic, only time will tell. Hope that clarifies my optimism a bit.
Pieter Callebaut profile picture
Very good analysis. Don't see much risk in Amazon in Benelux either. But expansion of Bol.com to France is highly unlikely in my opinion. Amazon has already a too large market share there, and other market places have filled open gaps as well (mano-mano for example).
DCF valuation gives me also a target around the €30 at least.
Bjorn Zonneveld profile picture
@Pieter Callebaut thank you for your comment Pieter. I agree that Amazon is rather large in France and that there would be a lot of competiition. However, if Bol.com wants to expand it would make sense to expand to France as it is somewhat similar to Wallonia. Also taking into account the size and the amount of internet users shopping online (70%). If they do decide to expand to France they do need a good strategy though. But for now only time will tell the next steps of Bol.com.
Thanks. Good overview of a solid Dutch company. There may always be better buying opportunities but for dividend investors it is now a good buy for long term (compared to the market being overvalued/overheated at the moment)
Bjorn Zonneveld profile picture
@div4dutch Thank you for the comment. I agree with you that it is a good time to buy. I know we as Dutch people perceive AD as a very Dutch company but I found it interesting that the majority of their sales is actually derived from the USA.

In my opinion we tend to look at Albert Heijn, Gall & Etos and think AD is doing very well but it is actually only a small piece of the puzzle. Something to take into account.
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