The Ahold Delhaize group's operating profits in Europe have halved in the last quarter – with the strikes and ongoing labour dispute surrounding the franchising of 128 Delhaize supermarkets in Belgium being the main contributor.
The impact of the many strikes at Delhaize is clearly visible in the group's quarterly results. The dispute erupted on 7 March when the Delhaize management announced that it would franchise the (large) supermarkets under its own management and that it wanted to slim down the local head office in Brussels.
The wave of strikes that followed forced many shops to remain closed for a long time, while those who were willing to work were paid while turnover dropped. At the same time, Delhaize was faced with a lot of fresh products that were not sold.
The exact cost is not clear, but the Ahold Delhaize group has witnessed its operating profit halving in Europe, De Standaard reports.
Significant impact of strikes
Out of an expected €267 million operating profit usually earned in Europe, only €134 million was made in the last quarter – €133 million less than normal. While Belgium was not the only factor in this, it probably was the most important one, spokesperson Isabel Meltzer told the newspaper.
"You also have the impact of higher inflation in the form of higher energy and transport costs, wages and raw materials. But it is fair to say that the impact of the strikes was significant," she said.
According to Ahold Delhaize's CEO Frans Muller, the (underlying) margin in Belgium was 20 basis points lower than in the past. Adjusting that as quickly as possible is one of his priorities; the labour dispute has cost Ahold Delhaize around €200 million in turnover, Belga News Agency reports.
While the willingness to strike among Delhaize staff in Belgium (and certainly in Flanders) has been declining considerably for some time now, that does not mean that the general feeling of malaise no longer weighs heavy.
Of the 128 to-be-franchised supermarkets, 15 are being sold in a first wave in October and November – meaning there is still a long way to go before all stores are franchised, but Muller expects the process to be completed by the end of next year.
Demonstration of the three main trade unions in Brussels, Monday 22 May 2023. Credit: Belga / Laurie Dieffembacq
Ahold Delhaize is negatively adjusting the value of the stores to be sold in Belgium by €108 million.
In the past quarter, a restructuring cost of €26 million was also taken; not only did the labour dispute contribute to the loss of customers – but also to an increase in staff absenteeism due to illness. This left gaps in the Delhaize workforce that management had to fill with temporary workers.
Trade unions are condemning the fact that Delhaize has not provided a social plan for employees who do disagree with the switch to independent stores. Delhaize previously stated that all personnel will keep their wages and working conditions, but because the staff will end up in a joint committee where wages and working conditions are lower, many fear that this better-paid position will soon prove untenable.
On paper, it will be more attractive for the independent shopowners to recruit new employees who will work for different pay and employment conditions and who will also have a contract that is based on more flexibility.
Muller raised the forecast of the free cash flow – which is how much money is left over after everything (including investments) has been paid – from €2 billion to €2.2 billion. On the stock market, however, Ahold Delhaize shares lost a few percentages, with analysts noting that the group did slightly better than expected, but that the quality of that profit could be questioned.
