Koninklijke Ahold Delhaize N.V. (AD) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the analyst conference call on the second quarter 2026 results of Ahold Delhaize. Please note that this call is being webcast and recorded. During this call, Ahold Delhaize anticipates making projections and forward-looking statements. All statements other than statements of historical facts may be forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict, and they make cause our actual results to differ materially from future results expressed or implied by such forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of Ahold Delhaize. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, JP.

Yes. Thank you very much, and welcome back. We missed you last quarter, and good morning to everyone joining us today. I'm delighted to welcome you to our Q2 2026 results conference call. On today's call are Frans Muller, our President and CEO; and Jolanda Poots-Bijl, 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, aholddelhaize.com, which also provides extra disclosures and details for your convenience. To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to 2 questions and [ 4 ] 2-part questions to make sure everybody on the call would have sufficient time. If you have further questions, then feel free to reenter the queue. To ensure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates, unless otherwise stated. And with that, Frans, over to you.

Thank you very much, JP, and good morning, everyone. I'm pleased to report that we delivered a resilient second quarter. We executed well against our Growing Together strategy, gained market share and are reiterating our full year guidance in a softer macroeconomic environment. Before I discuss the quarter in more detail, I would like to reflect on an important milestone. This summer marks the tenth anniversary of the merger between Ahold and Delhaize Group. What began as a belief that strong local brands could become even stronger through international scale has become a proven model for profitable growth and market share expansion. Ten years on, we operate from a position of strength, with clear priorities and significant opportunities ahead. Challenging markets provide the clearest test of a business. When households are under pressure and competition for every shopping trip remains intense, the strength of your brands, the relevance of your proposition and the trust you have earned to become even more important. Relative market share is one of the clearest measures of whether customers continue to recognize the value you create. Market share is earned and not given. Our first half performance is a proof point that our Growing Together strategy is working. It also reinforces how we are steering the business in this difficult environment. First, we stay close to our customers and earn their trust every day through value, quality and convenience. And that means strengthening our own brand proposition, investing in price where it matters most and using customer insights to respond thoughtfully and quickly as needs evolve. Second, we make life simpler for our associates. We are investing in technology, data and AI to reduce complexity, improve decisions and give our teams better tools. The objective is straightforward, enable our associates to work more effectively and spend more time serving customers. And third, we invest with discipline. Strong cash flow generation gives us the freedom to strengthen our brands, build future capabilities and maintain the financial resilience to invest throughout the cycle. Discipline does not come -- does not reduce our ambition, it just enables it. Steering our business in this way reflects both the simple and the complex part of retail. We need to run great stores, provides compelling value, keep products available and serve customers well every day. At the same time, we must modernize our technology, scale omnichannel capabilities and prepare our business for the next generation of retail. We are determined to do both exceptionally well. Let me bring each of these to life in a little bit more detail. It all starts with the customer. Every decision we make is guided by how we can deliver greater value, better choices and more convenient experiences in customers' daily lives. And every week, millions of loyalty interactions help our brands understand customers in real time. Combined with data and AI. These insights enable us to personalize experiences, make better decisions and strengthen the connection between our local brands and the communities they serve. That local intimacy, strengthened by the scale and capabilities of the group, enables our brands to tailor assortments, sharpen the value proposition and respond effectively as customers need to change. This is how trust is built, through many special and small decisions and experiences delivered consistently every day. One of the most important drivers of this is through our own brand assortment. In the quarter, own brand food penetration increased by 0.7 percentage points, and this marks an important milestone, with group penetration now exceeding 40%. We are particularly pleased with the continued progress across our U.S. brands, supported by the successful launch of our 200 new own-brand items across 25 center store categories and selected fresh categories as well, including tomatoes and packaged shallots. As all brands prepare for the back-to-school season, they are expanding the assortment with new children's lunch products, helping parents manage the demands of a busy time of the year. Own brands is most powerful when combined with meaningful and sustained price investment. Our brands are being precise about where price distance matters most and where investment can make the greatest difference to customers. And a few examples include, for example, Stop & Shop, lowered everyday prices across all 137 stores in New York and New Jersey. All Stop & Shop locations now have the price investments in place. Hannaford has priced more than 3,500 key value items in its own brand assortment at parity with leading competitors. And Albert Heijn lowered prices of more than 500 popular price favorites to further strengthen its value proposition. And in Serbia, Maxi now offers over 600 high-quality affordable products under its new price favorites label. Across our business, by providing smarter tools and simpler ways of working, our teams are focused on making life simpler for associates so they can spend more of their time serving customers and innovation. Data technology and AI are important enablers. We're investing where it can improve decisions, remove friction, strengthen productivity and create new opportunities at scale. We approach AI through 3 clear lenses, reimagining business domains, optimizing existing processes and systems and democratizing AI tools for all of our associates. And after approving results with over 120 AI use cases, we are moving to the next level of maturity. We're now looking at end-to-end transformation across sourcing and merchandising, marketing, store operation and agentic shopping. In sourcing and merchandising, Albert Heijn is helping shape a future in which agents support better and faster decisions, helping teams get the right products on to the shelves at the rest price points. In marketing, bol has launched campaigns featuring AI-generated models, and this illustrates how AI can shift the role of marketeers from producing every element of content to directing the process, setting context and guardrails and providing human oversight. And in agentic shopping, we are developing our own autonomous shopping agents by optimizing our interfaces with external AI agents, so that our products can be found and purchased easily through third-party AI assistance. These are sophisticated capabilities, and we're approaching them thoughtfully. That means testing, learning and scaling what works with clear governance and human accountability. In parallel, we are modernizing and harmonizing our retail technology backbone. This creates the foundation for the next generation of AI-enabled capabilities, and will allow us to deploy improved retail performance solutions at scale. Let me now turn to how we are investing with discipline to strengthen our brands and their omnichannel ecosystems, where online continues to show stronger customer appreciation and further growth opportunity. At the heart of this opportunity is convenience, which remains a primary driver of online grocery adoption and retention. Convenience is not one thing. It's created through time saved, digital ease and assortment quality and reliability. First, convenience means saving customers' time. And whether they choose Click & Collect or delivery, same day or next day or even same hour, our brands are making it easier to fit grocery shopping into daily life with flexible solutions that reduce friction and support repeat engagement. In the U.S., nearly half of online sales come from Click & Collect, which continues to grow at a healthy pace. And to meet demand, our teams are using data and PRISM analytical functionality to increase capacity and more effectively, allocate labor. In high-volume stores, we are introducing dedicated order picking space, reducing disruption for in-store customers while improving efficiency and capacity. At Delhaize in Belgium, Collect is the fastest-growing channel, with growth of over 20% this year. And last year, Delhaize made Collect easier and more affordable by removing fees for in-store pickup. With online penetration still offering substantial room for growth, we are now expanding the network, with the ambition of rolling out to all stores by 2028. Second, we are making the shopping journey simpler and more seamless, and this includes digital and agentic AI functionality that helps customers plan and complete their shopping. In the coming quarter, Stop & Shop and The Giant Company will pilot AI-powered functionality that connects recipes with ingredients, enabling customers to find meal inspiration, personalized options based on preference and purchase history and add ingredients directly to their baskets. Albert Heijn is adding functionality to my Albert Heijn app, focused on social and agentic shopping, enabling customers to discover recipes through Instagram and TikTok and turn them into shopping lists. To wrap up, I'm pleased by the progress we are making with our investments and our strategy execution. And even more so, I'm proud about our teams, how they are anticipating and responding to the environment we are operating in. We are clear about our strength and determined to use this backdrop to create opportunities to ensure our relative pace of growth stays strong. And with that, over you to you, Jolanda to discuss the financials.

Thank you, Frans, and good morning to everyone. As shared, we are navigating a demanding environment from a position of strength. I'm encouraged by our performance in the quarter, our volumes are resilient, and we are winning share in most of our major markets. Energy and utility costs continue to affect household budgets and operating expenses across the value chain. At the same time, competition for every shopping trip remains high, with retailers continuing to invest in price and promotions. Our response is calm, focused and disciplined. Two years into growing together, we are seeing our growth model mature, with many of the actions we identified to strengthen competitiveness now delivering tangible results. Let's have a look at the key underlying results for the quarter shown on Slide 15. Net sales grew 1.9% to EUR 23.2 billion, and we were negatively impacted by 10 basis points from calendar shifts. Underlying operating margin was 3.9%, a decrease of 10 basis points. Improvements in Europe were offset by a modest decline in the U.S., and diluted underlying earnings per share was EUR 0.63, down 1.4% at constant rates, primarily due to higher financial expenses. Slide 16 shows our results on an IFRS reported basis for Q2. These were EUR 41 million lower than our underlying results, mainly related to impairment charges on operating stores in the U.S., the sale of investment properties and lease terminations. For your convenience, Slide 17 provides our comparable store sales trends, with and without adjustments for calendar and other notable items. Turning to our regional performance. U.S. net sales were EUR 13 billion. Comparable sales, excluding gas, increased 0.8%. Top line performance was negatively impacted by a mix of factors: calendar shifts of 10 base points; pharmacy sales impacted by the Inflation Reduction Act, resulting in 70 basis points; deflation in egg prices of 50 basis points; and the reduction in SNAP benefits from eligibility changes of 40 basis points. Together, these factors reduced our growth rate by 1.7 percentage points. In the second half of the year, we expect to see a similar impact in pharmacy and a lower impact from deflation in egg prices as we cycled last year's price spike. For SNAP, we expect some minor variability between the quarters due to the complexity of the program and the timing of benefits. For the full year, we expect an impact of around 60 to 80 basis points. Underneath these factors, our competitive position remains strong. We gained market share across most of our U.S. brands, demonstrating the resilience of our growth model and the relevance of our customer propositions. Underlying operating margin in the U.S. was 4.2%, down 20 basis points. A favorable mix in pharmacy was offset by price investments, higher utility costs and the absorption of indirect cost from higher energy prices. Our U.S. online channel strategy remains an important driver of growth and a source of differentiation. Online sales increased by 14.5% in the quarter, with Food Lion growing by over 20%. This demonstrates the strength of our omnichannel model in expanding reach, improving convenience and attracting new customers into our ecosystem. We also continue to strengthen the local market positions at the heart of our growth model. Our U.S. remodel program is delivering encouraging results, with completed projects consistently performing above baseline expectations. At Food Lion, we are currently remodeling 93 stores in the Greensboro market, with launches planned for the end of the year. Preparations are already underway for the next kind of remodels in the Richmond and [ Renoga ] markets. Turning now to Europe. Sales were EUR 10.2 billion. Comparable sales increased 1.8%, excluding the impact of calendar shifts. Underlying operating margin in Europe was 3.9%, up 10 basis points. The realization of synergies in Romania, lower turnover tax rate or [ inca ] and labor productivity improvements were partially offset by lower performance in Serbia versus last year, following the government decree on grocery pricing and by the absorption of indirect costs from higher energy prices. In Belgium, we are building on encouraging momentum, supported by strong operational discipline and the continued success of our localization and franchising strategy. Since the beginning of the year, we have strengthened our position by opening up 7 new Delhaize stores and 2 Albert Heijn stores and by adding 300 convenience style locations through the Delfood acquisition. We've also continued to enhance the customer proposition. The successful Little Lions campaigns are delivering tangible improvements in price perception. Both Albert Heijn and Ahold Delhaize continued to gain market share in Belgium, reflecting the strength of their complementary propositions and the trust that customers place in the brands. And bol, performance was solid, affected by the comparison with a strong prior year and by continued consumer pressure, which contributed to downtrading in parts of the assortment. In a highly competitive market and evolving online shopping behavior, bol remains focused on strengthening its platform through productivity initiatives, enhanced advertising monetization and the thoughtful deployment of AI. Customer loyalty remains an important differentiator, reinforced by the successful effe bollen campaign, which stresses both the convenience and trustworthiness of bol. Moving on to free cash flow. Q2 free cash flow was EUR 632 million. Year-to-date, free cash flow was EUR 302 million, which is EUR 430 million lower than last year. The year-on-year movement was driven by net working capital, reflecting calendar effects and seasonal phasing related to the strong year-end in 2025. This is largely a matter of timing, and our full year 2026 guidance remains unchanged. Our strong cash generation over time gives us the capacity to invest in customers, associates, stores, technology, and future capabilities, while maintaining disciplined shareholding returns. We remain thoughtful about capital allocation and are focused on converting performance into cash. I would also like to highlight the progress we're making toward our ambition to increase healthy food sales. Our brands are committed to make healthier and more sustainable choices affordable and accessible, helping customers and communities make positive choices and live healthier lives. A good example is Delhaize's expansion of the SuperPlus loyalty program through SuperPlus families. For only EUR 1 a month, SuperPlus families combined structural benefits on a wider range of healthy and plant-based own-branded products, with volume discounts on family purchases. Recent customer research indicates that 60% of SuperPlus customers say the program helps them to live healthier lives. At Albert Heijn, project reformulations, the launch of new healthy snacks and the new product line focused entirely on fiber, contributed to steady year-on-year improvements in healthy food sales. In the U.S., our brands continue to respond to healthy eating trends, including strong growth in yogurt and high-protein products. Our brands are at the heart of their communities. Health is, therefore, not a separate agenda. It's part of how we build a relevant customer proposition and support the long-term well-being of the communities we serve. This brings me to our outlook. Our teams delivered a resilient first half of the year, and our performance so far in the third quarter is demonstrating the same level of resilience. We, therefore, reiterate our full year guidance, which this year is based on a 53-week basis; underlying operating margin of around 4%; free cash flow of at least EUR 2.3 billion; gross capital expenditures of around EUR 2.7 billion; and diluted underlying earnings per share growth at mid- to high single digit based on a constant exchange rate. As we look to the coming months, we expect the operating environment to remain dynamic and demanding. Households are value conscious. Volumes are subdued in several of our markets, and there's plenty of competition for every shopping trip. These conditions sharpen our focus. They make it even more important to stay close to our customers, act decisively and direct our investment to the areas that visibly strengthen our competitive position. Our brands are well prepared as we enter the back-to-school and holiday periods with relevant campaigns, strong assortments and compelling value, supported by targeted price investments and increasingly convenient omnichannel propositions. At the same time, we remain disciplined on the fundamentals, running great stores, improving productivity, managing cash and capital carefully and executing consistently. That balance, supporting customers today while investing in future capabilities to drive growth, is central in our strategy. With clear priorities and the confidence based on our great local brands track record and execution, we built on the positive momentum and further progress towards our Growing Together ambition. With that, I thank you for joining us. And Sharon, please open the lines for questions.

[Operator Instructions] We will now go to our first question. And our first question today comes from the line of Frederick Wild from Jefferies.

Both on the U.S., please. So first of all, I don't suppose you could give us some of the margin moving parts in the U.S. in half 2 and how to think about the development from here because I realize there obviously quite a few different moving parts. Second, I do see you could give us your sense of how the competitive environment in the U.S. is changing? Obviously, there have been lots of comments from competitors over the last few weeks about maybe changing investment program. So if you could give us a sense of what you're seeing changing on the ground and how that's impacting your food inflation expectations for this year? That would be super helpful.

And thank you, Freddie, for those questions. As you know, we don't guide on a regional basis, but I'll try to shed a bit of light on the U.S. margins. As stated, there were, as always, quite a few elements impacting that margin. On the first element I would like to [ guard ], of course, price investments. We are investing in prices to drive growth and to support our customers. We also had some upside through the pharmacy mix, and we expect that to continue in the following quarters. And we also, of course, see higher utility rates that are impacting our margins. I think the negative impact from other elements are offset by positive impact. So the most important ones are the ones that I just called out. If I look at the development in the next few quarters, I would say as a group, we are confident that the margin prediction that we've given in our guidance is feasible for us, and I don't see a lot for the group, a lot of downside into that margin guidance that we've given.

And Frederick, on the competitive element, first of all, I think we all know that we have #1 and 2 positions on 90% of our total sales on the East Coast. So we have strong market positions with strong relative market shares and brand strength. Having said that, we see a rather rational pricing environment at the moment between communication and reality, there's sometimes a gap, what competitors tell us. But we are very much on the front foot. We have, by brand, our competitive set of competitors, and that differs between the south and the north and the Mid-Atlantic. And we are in line with our pricing strategy. Jolanda mentioned already our price investments, the EUR 250 million for the full year. That's 1/4 of the EUR 1 billion for the total strategy period. So we use those instruments to make sure that we stay competitive. And if you then look at Stop & Shop, for example, which is a high attention point, fully invested in price now, but the Stop & Shop, we gained market share, we gain sales and we gained volume, and we have an NPS at an all-time high of 79. So far away, Frederick, from arrogant and over confident, very focused. We look exactly what's happening both in the categories, but also off-line and online. And at the moment, I think we're doing the right thing. And that is, of course, for the second half, also super important. We follow very precisely, everybody, image items, KPIs, foreground to background and market by market, which is a different competitive set for Hannaford compared to The Giant Company or to Stop & Shop. So we follow very precisely, and we measure the prices on a daily basis.

Your next question today comes from the line of Izabel Dobreva from Morgan Stanley.

So following up the question on the U.S. competitive environment and your price investments. Could you spend a little bit of time discussing the timing of those price investments this quarter and why the margin was down? Was there an element of putting through more price investments in Q2 than you did last year? So what's kind of the seasonal mix and timing impact of having more investments year-on-year? Or is it a case that you're actually accelerating the price investments compared to the base which you were putting through a year ago, which would also continue into the back half? And then my second question is around your EUR 1 billion price investment budget. If the environment evolves in such a way that you reached the conclusion at some point that you need to upsize this program, how quickly would you be able to find additional cost savings in order to potentially offset a larger price investment budget?

Izabel, good to have you back on the call, by the way, and thank you for the questions. Our price investments are executed as we planned for -- as we shared earlier, we have EUR 1 billion over 4 years, and they are not exactly equally spread over the 4 years. And we phase them through the quarters as we see opportunities. And if we see results from small pilots that we do that are positive, then we continue. So it's not something you can mathematically upfront, plan on a period-by-period basis. So in this year, we are up to speed. We have executed according to the plan that I referred to, and we have our biggest DMAs done at this point in time. If you would ask us how fast can we upscale our cost savings. We are on a trajectory to deliver on the EUR 1.25 billion cost savings for this year, and also that is in line with plan. So I don't see any big deviations at this point in time. I do see that the price investments that we make, not only for shop-in-shop -- Stop & Shop, but also for the other brands are paying up because if you look at our volumes overall for the group positive, also very competitive in the U.S. because the U.S. shows negative volumes. I think Nielsen stated 1.2 2.6% negative in the quarter, and our market share growing in most of the brands in U.S. indicates that what we're doing is paying off. And we also see that as Frans referred to in Net Promoter Scores. So for now, the trajectory is one that we have confidence in and we'll continue. If we see opportunities or if the market warrants, we will have the flexibility to go after those opportunities and deepen price investments, but we don't see the necessity at this point in time.

And Izabel, it's quite understatement, interesting environment at the moment where we trade, right? So with raw materials, energy prices, geopolitics and consumer sentiment. And in that environment, we are trading very well. So if energy prices come down, if raw materials are in -- are more normalized when conflicts -- armed conflicts and these kind of things, hopefully, once get over with, might give us a little bit more space also to reinvest. And at the moment, in this difficult environment, we find the reinvestments in our pricing as per strategy. So I'm pretty proud of what the team did so far.

Your next question today comes from the line of Robert Jan Vos from ABN AMRO ODDO BHF.

Yes. Coming back to the U.S., you showed that underlyings are corrected for the pharmacy impact and also weather, there was a small decrease in comparable sales growth in Q2 versus Q1. However, at the same time, food inflation increased, I think, by almost 100 basis points. So is this a reflection of deteriorating consumer sentiment? And more specifically, did you see that more towards the end of the quarter? Or was it more evenly through the quarter? And then my second question is on free cash flow. Very clear comments that you still expect the EUR 2.3 billion goal to be achieved, and we already saw a recovery in Q2 versus Q1. But there's still -- you're still trending below quite materially. So should we expect most of that recovery to come in Q3? Or maybe we have to wait until the very end of the quarter -- the year in Q4? Those were my questions.

Thank you, Rob Jan. Jolanda will come back to the cash flow question on pricing and inflation. We just talked also together with Izabel about pricing and price investments to stay on line with our strategy. That's what we have done also in this quarter. Where you could argue that the out-of-home statistics on CPI food at home is 2.7% in the quarter in June. Our own internal inflation was much lower. If I would indicate, that's roughly about 1%, our internal inflation. And that has to do, of course, with our price investments at the same time. So don't compare external total market inflation with our inflation because, yes, we would like to be priced competitively, and we invested in our pricing as we work the EUR 250 million per year. So that's one thing. The second thing is that if you look at our total composition of the sales, that composition is also changing. If you look at the mix of owned brands and national brands also went at the benefit of our own brand development as well. Also there in the U.S., 70 basis points growth in the own brand assortment. So that means also that gives you also a different mix. And that mix is a beneficial mix, which comes to customers, and that's exactly why customers love our own brands. And that's why this is also an instrument to be priced right or priced even better. On cash flow?

Yes. Robert Jan, on cash flow. So yes, as you stated, the trend in Q2 is improving versus Q1, so we're happy with that development. And as you know, Q1 was subdued because of the overdelivery year-end 2025. And with working capital, it's always the same thing to bear in mind, if you have an over delivery in a certain period, the next period, you need to cover for that. So we are recovering, and with confidence, we reiterated our guidance for the full year. Will it be Q2 and Q4? We never guide on quarterly phasing, certainly not for free cash flow. But as you know, the season is in Q4. And cash flow is always heavily focused on Q4. Our focus on working capital remains, and we do see that we are trending well and are recovering from that overdelivery or outperformance in Q4 last year. So that, in a nutshell, is how we look at our free cash flow guidance.

Next question today comes from the line of Sreedhar Mahamkali from UBS.

Maybe a couple again, please. Is -- I guess, there's a broader concern, Frans, if you could address that, that would be amazing helpful because I think there's quite a lot of noises out of your peer group. I think you've already mentioned there's a bit of a gap between communication from peers and reality. If you can flesh that out in the markets that you're operating, particularly East Coast and Virginia, not in Carolinas, are you seeing anything actually changed on the ground? I mean with your years of experience, is this noisy period? Or do you think this is the beginning of a new wave of price-based competition? That will be incredibly helpful if you could help us understand a little bit. Secondly, I think on the Q1 call, you talked about minimum wage changes in Netherlands from Jan '27 quarter [ on ], do you have any further insights into how we should be thinking about the potential impact coming from there into next year? And thereof, your ability to take back, realizing it's an industry-wide pressure not [indiscernible].

Thank you, Sreedhar. Hope you're doing well. On the peer group and the announcements people make, I think you guys have very good data, which of the major players are in our markets and which are less in our markets and our market shares and our relative market shares. And that is already quite a difference from those operating national play and are not that strong in our East Coast markets. And we talked quite a couple of times about our market positioning in the north, in the south and the Mid-Atlantic. And I think what is fair to say and that we also -- what we see in our numbers that -- if you look at online, I think that is an important part where we will grow more and where we also see a little bit more activity by 2 larger operators. But on the ground, on the store level and -- a nice proof point is the Stop & Shop investment in New Jersey and New York, where we see those price investments do work and do yield volume and sales growth. So not all our -- not all the big competitors in the U.S. are also active in our markets nor do they have big shares. But market by market, we look at this. So I think there's not a new phenomenon to identify it, to indicate here, Sreedhar, but what is also clear is that we have an opportunity here to grow our online growth more.

Yes, Sreedhar, on the minimum wages, there are still some decisions to be made by the Dutch government on this topic. So it's still -- the big changes are still out there. If I look at the current changes in minimum wages and in wages in general, as always, we strive to offset them with our, say, for our customer program, productivity improvements, AI, et cetera. That is the continuous, one could say, balancing act we're in.

And the next question comes from the line of Monique Pollard from Citi.

I've got 2 as well, if I can. The first question was just on the backdrop in Europe in terms of inflation. So I think a number of your markets, you're now seeing some level of disinflation. Just wanted to understand whether that is a negative or a positive for the top line, when you think about sort of the dual impact of both pricing and volume on the consumer? And then the second question I had was on the private label penetration, which is looking really good, obviously, this period. Just trying to get a sense, if I can from you, how much do you think the higher penetration is a function of a sort of more cautious consumer and the more volatile and weaker macro versus how much you think is the internal work you're doing in terms of realigning the stores in the product portfolio?

Let me -- thank you for the question, first of all. Let me answer the second one, and Jolanda, can you take the first? Is it okay for you?

Yes. The first question, can you reiterate that one for me? The Europe inflation?

Do you see...

Sorry. Positive or negative. Sorry, I don't have the best days in the world. Ultimately, I follow impact our customers. So a negative inflation in an environment where prices have been increasing quite substantially, I would call out as a positive because it supports our customers, and will, in the end, might take a bit of time, so there might be a lag, but it will, in the end, drive positive volumes as well. In general, but that's on the long run, an inflation of around 2% is, I think, healthy. So you wouldn't want to have deflation for a longer period of time. But at this point, I would say, helping customers, helping our volumes. So that is how I would depict that.

And net sales in Europe, 1.6 comp sales in Europe, 1.7, a very different inflationary environment in the Benelux versus the CSE countries, the Eastern part. So that's also a mix we should see, but I agree to that. I mean, also there to be priced right is also super important here. And that will gain loyalty and that will gain sales in the end. And also what we said earlier, the own brand mix might also play an important role here, even more important than in the U.S. The second thing question was about on brands. And...

Whether or not it's more of a [ cut ]...

Okay, Yes. So sorry about it, yes. Sorry about -- so on brands, yes, we have, with own brands, a very clear strategy. This is meant to differentiate ourselves to have a unique set of brands, own brands items, which serve not only value in a number of instances without price favorites, but also serve better ingredients, serving healthier choices. And you see, for example, if it's Hannaford or if it's Food Lion or if it's Albert Heijn or Delhaize or Mega Image in Romania, that customers are focused on brands which have a better formulation, which is better ingredients, which have less additives, which are healthier for their own diets. So that's part one thing. On the other thing, as we know that a lot of household budgets are challenged, the component of value and price is also important. That's why the price favorites are there. So in our total own brand category, own brand portfolio, we have different roles what own brands play. And for us, it's important to make sure that own brands are the right answer for our customers for the various angles of interest they have, and that is both for an affluent customer, can be different than for a challenged household customer, and that is how we construe that. And we do this because we think that customers are looking for these kind of solutions. And we see also very nice upticks in our own brand shares. And if you look at the vegan assortment at Albert Heijn, we see very beautiful upticks in over fair share -- over fair market share participations at our end. And you see at a Stop & Shop when they work on their price positioning in own brands, that also customers react to this for those elements where budgets are challenged. So on brand strategically for us are important, 45% 2028 is our target. Breakthrough just made with 40%. So we're on the right trajectory. And you see that customers love it. They love that different roles in the total portfolio of brands. And customers come with different demands in our stores. The variety of groups is quite high. So that's the beauty of our brands that can serve different customer groups for different purposes.

And I think, Frans, also in an era maybe of agentic AI ahead of us that having that loyalty, which is always very important, might become even more important than it was in the past. So double down on unbranded sales. That's the strategy.

Your next question today comes from the line of Rob Joyce from BNP Paribas.

So the first one, just on the U.S. It looks like grocery sales tracking real [ much ] below overall consumer spending. Can you just give us a bit more detail as to the kind of changes or weaknesses you might be seeing in the U.S. consumer, and whether we'd expect any of those to change in the second half? Maybe giving us a bit of clarification on the expected impact of SNAP in the second half would be great. And then the second one, again, on the U.S. I appreciate you're not backing on giving color on the individual segments. But I think there's quite a bit of concern in the market about the tough margin comps in the second half in the U.S. versus second half last year. Do we think the second quarter of '26 of 15 bps down is a reasonable read for the second half of '26 in terms of that U.S. margin? Any color you can give us on that would be much appreciated.

Thank you, Rob. I think it's fair to say in the present environment, we talked about the macro environment as well and what does it does to consumers and sentiment and household budgets. I think sales overall are softer, both in the U.S. and in Europe. I think we have to live with that. So it's a relative view we need to have. And I already indicated earlier, through our price investments, we see a different type of inflation than maybe the CPI at the Northeast would tell us. So I also expect this to be rather a stable environment on sentiment as such. And we might see some changes when geopolitically, there are some breakthroughs there, but that is not for us as a retailer to forecast. But the softer sales environment in which we do very well, I think, and competing most of our brands are getting market share. We showed you the results, both on margin and nonsales. And that also despite all the investments we have made in a higher participation online, investments we made in digital and technology, albeit for the future and the 40% on brand participation. So a softer sales environment, which I think will stay for the rest of the year, in which we do pretty well.

Yes, Rob, and your question on the U.S. margin. As we stated indeed, we don't go into regional guidance and certainly not on a quarter basis. But the full year guidance of around 4%, as I stated, we don't see a lot of downside in that guidance. And for us, it's not just margin, it's the combination of margin with growth market share, hence competitive strength. And that together will allow us to reiterate our guidance not only for this year, but also with a going together period in which we aim for high single-digit growth on EPS, and that's the guidance that I can give you at this point in time.

Yes, maybe for Rob, maybe some...

Are you making an exception for Rob, Frans?

An extra nugget, maybe. I think if we look at the start of the third quarter, the month of July, fresh from the press, with a strong start in July in our results in the U.S. So I think there's also -- just give us an extra support for our confidence in our total guidance for the year.