Ahold CEO John Rishton adresses Annual Meeting of Shareholders
Amsterdam, the Netherlands - Ahold's Annual General Meeting of Shareholders on
April 13, 2010, included a speech by Ahold Chief Executive Officer John Rishton.
Good afternoon and thank you for joining us today.
In 2009, Ahold delivered solid results in absolute terms and excellent results
in relative terms.
Overall, I am pleased with our performance.
It was a tough year for the industry. It was a year of recession in all of our
markets, a year when unemployment increased, consumer confidence fell, we saw
customers trading down and, for the first time in years, we saw food deflation.
As a consequence, the intensity of the competitive environment increased
substantially.
Against this backdrop, we:
* Grew sales by 6% at constant exchange rates;
* Increased income from continuing operations by 9.6%;
* Delivered an underlying retail operating margin of 5.1%;
* Improved operating cash flow and our return on capital;
* Achieved higher customer satisfaction ratings at Albert Heijn and at each of
our U.S. banners;
* Albert Heijn, Giant-Carlisle, Giant-Landover, Stop & Shop, Gall and Gall,
Etos, ICA Sweden and ICA in the Baltics, all increased their market shares;
* And we drove volume increases in all of our operations.
Looking at our individual banners:
Albert Heijn grew market share to a record 32.8%. To put this into perspective,
just three years ago the market share was 27.5%. This growth reflects the
customer-focused strategy centered on offering great value, service, innovation
and convenience and in 2009 the successful integration of the former Schuitema
stores. In 2009, we opened 48 of our new format stores, bringing a better, more
enjoyable shopping experience to thousands of our customers. The stores have
more than 1,000 new products than the ones they replaced. As many of you here
today will know, we launched AH puur&eerlijk, a new private label umbrella brand
for a range covering organic, fair-trade, ecological non-food, free range meat,
and sustainably-caught fish. We launched a new application for the iPhone, which
has been extremely well received -- in fact it was the most downloaded
application in the Netherlands for several weeks. It is based on the simple
premise of a shopping list and actually displays your list in the order that
products are available in the store . and adjusts to the layout of each store.
The application, known as Appie, also provides recipes, store information, bonus
offers and other features. In the last two GfK surveys ranking overall
supermarket performance in the Netherlands, Albert Heijn improved its position
with the extra large format stores coming first. Our drugstore, Etos, increased
market share and is now the second largest health and beauty retailer in the
country. It was named best drugstore for the second year in a row. Our wine and
liquor chain, Gall and Gall, celebrated its 125 year anniversary, grew share,
and rebranded to help increase its appeal to an even broader customer base.
In the Czech Republic, we completed a major restructuring of our business. We
finished the rebranding and all our stores now operate under one brand, called
Albert. We closed 23 underperforming stores, downsized 12 large hypermarkets and
made substantial cost reductions across all aspects of the business. I am
pleased with the progress we made in the Czech Republic last year, but the
financial results remained unacceptable. While I forecast that we will be
profitable this year, which is a good improvement compared with 2009, we must
continue to develop our customer proposition to ensure we meet their needs, so
that we can have a strong, financially viable business.
Our joint venture ICA had a good year. In Sweden, primarily as a consequence of
decisive price reductions, we increased market share; this, coupled with
increased cost focus, resulted in operating profits increasing 35%. ICA Norway's
results improved - and the business was profitable in the fourth quarter
compared with substantial losses a year ago. The management team there has
brought intense cost and customer focus to the business as well as introducing a
new discount format for the Rimi stores. We now have 76 remodeled stores from a
total of 247 and the roll out continues. In the Baltics, we grew market share
and slashed costs, including significant pay reductions, but the economic
environment, probably the worst in Europe, meant that we made losses. When the
environment improves, I am confident that we will quickly return to
profitability. ICA's solid performance and their very strong balance sheet make
it an attractive asset within the Ahold portfolio.
As we announced last month, we have decided not to sell our share of JMR at this
time. We have concluded that the price we could achieve today, based on current
market conditions and the nature of our stake, would not be good value for our
shareholders. The good news is that this is a strong business with a good
dividend stream and while our ownership structure is clearly not ideal from an
investor perspective, I am not prepared to give this away just to simplify our
portfolio.
Turning to the US, at Stop & Shop and Giant-Landover our market share grew,
margins improved, and identical sales volume and customer trips increased.
Customer scores for price, quality and overall satisfaction improved and we
launched a new value program with new loyalty cards. Stop & Shop and
Giant-Landover were presented with the prestigious Supermarket News Retail
Excellence Award for 2009. As part of its three-year store refresh program,
Giant-Landover remodeled a further 34 stores taking the two-year total to 66.
The results for these stores helped Giant-Landover improve gross margins, grow
share and achieve the highest identical sales of our three U.S. banners.
At Giant-Carlisle margins fell, reflecting the competitive environment and
higher costs. However, we increased identical sales volumes, improved customer
satisfaction and grew market share.
For all three banners we have stepped up our customer insight initiatives and
hired an external agency to help improve our analysis and understanding of
customer behavior.
We announced a major change to our organization last year as the next step in
becoming more customer focused while simplifying the business to improve
efficiency. For the first time, the structures in Europe and the United States
now reflect each other.
We also made some important management appointments during the year. As part of
the changes we made in our European and U.S. businesses, we named Carl Schlicker
President and CEO of Ahold USA Retail and appointed Sander van der Laan as
General Manager for Albert Heijn. In the beginning of December, Lodewijk Hijmans
van den Bergh joined Ahold as our new Chief Corporate Governance Counsel. You
will vote on his appointment later in this meeting. His predecessor, Peter
Wakkie, retired at the end of the year. Peter had been a member of our executive
board since 2003 and played a major role in transforming Ahold. I would like to
thank him for the enormous contribution he made and wish him well for the
future.
We continued to make progress with our corporate responsibility strategy. Along
with over 500 of the world's
largest companies, we signed the Copenhagen Communiqué and supported the
Consumer Goods Forum initiative on climate change. To improve our own carbon
footprint, we are using innovative technologies to make our stores and
distribution centers more environmentally friendly and reduce the amount of
energy they use. To help our customers in what was a particularly challenging
year, we provided information in our stores and on our websites about stretching
food budgets further and eating well for less. In addition, we focused on
helping those most in need in our communities, including supporting food banks
in both Europe and the United States. You can read more about our corporate
responsibility strategy and our activities last year in our 2009 Corporate
Responsibility Report.
Looking to 2010 and beyond:
Consistent with many CEOs, I don't see any significant improvement in the short
term in the economic environment. I expect unemployment and under-employment
will remain relatively high and, consequently, I suspect consumers will remain
cautious. We anticipate that some inflation will return during the year. At the
start of 2009, the environment for our industry was relatively benign but during
the year we encountered deflation and trading down by customers. In 2010, I hope
we will see the opposite with conditions improving through the year. But our
visibility, like everyone else's, is limited.
Consequently, as in 2009, we will rely on our own proven ability to adapt
quickly and effectively to changing circumstances. We will continue to balance
margin, sales and share. And while we are not giving specific margin guidance,
the stability of our total underlying retail margins for the past few years at
around 5% should provide some comfort that we can balance sales and returns
effectively. On the sales side, we will continue to grow the top line despite
deflationary pressure and consumer down-trading.
We plan to increase our capital expenditure by about 40% to 1.1 billion euros
this year, while we see many competitors pulling back. Part of this will be used
to support a faster roll out of remodeled stores. Albert Heijn, for example,
will almost double the roll out speed of its new store format to around seven
per month. We will be increasing remodeling activity at Stop & Shop and
Giant-Carlisle and completing our three-year program to remodel 100 stores at
Giant-Landover.
In the Netherlands, we will look to grow beyond satisfying consumers' food
requirements into meeting their overall daily needs. As you know, we have the
ambition to stretch our strong food presence into some non-food categories. We
formed a dedicated team that has been working on our non-food proposition for
the past two years and last month we launched a new non-food offering focused on
what we call consumable durables. We have focused on four categories: sleeping
and dressing, working and playing, cooking and living, watching and reading, and
developed 1,200 new products with distinctive designs at very competitive
prices. We will not increase the space allocated to non-food in our stores but
will use the existing space more efficiently -- we will not be reducing our food
offering or the space devoted to it.
As we grow in non-food and services, we will have an opportunity to
substantially improve our e-commerce offering. Even without a broader offering,
grocery sales online are expected to double in the coming five years in
developed markets. We have the brands and infrastructure to take our share of
this.
In the United States, we continue to improve our store formats and have had a
cross-continental / cross-functional group of senior executives examining the
convenience market and opportunities for smaller format stores.
During 2009, we launched nearly 1,000 private label products in our U.S. stores,
and this year we will continue to improve and expand our private label offering.
In terms of new markets, earlier this year we acquired Ukrop's, a leading food
retailer in Richmond, Virginia, which is a new market area for Ahold. The
business is being run by the Giant-Carlisle division. Progress is good and we
believe we can integrate the operations smoothly and effectively - with the
helpful support of the Ukrop family and Ukrop's management team. We see
significant opportunities to grow revenues and improve performance. For example,
unlike its competitors, Ukrop's was not open on Sundays, the busiest shopping
day of the week in the United States, nor did they sell wine or beer.
In Europe, we are evaluating organic growth for Albert Heijn into Belgium - in
particular whether we can push over the border and use the logistic strength of
our Dutch operation.
You may also be aware that we have purchased five former Shaw's stores in
Connecticut.
While the Ukrop's and Shaw's deals in themselves are small, they are a good
indication of the opportunities available in the current environment and they
are also evidence of a shift to a new phase for Ahold and our intent to grow
both in new and existing markets. As you know, we have a mid-term annual target
for growth of 5% - we will achieve this and more based on the business we have
today.
Our employees - the core of our business - continue to make the difference with
their unwavering commitment to caring for our customers. I would like to thank
them for their support and hard work over the past year.
In summary, in 2009 Ahold delivered another solid set of results, we adapted
quickly and effectively to the changing environment, further strengthened the
business and took opportunities as they arose. We completed our ?500 million
cost reduction program and began a new ?350 million cost reduction program to be
completed by the end of 2012. Last week we began a ?500 million share buyback
program to be completed over twelve months and we are asking you to vote on a
28% increase of our dividend. We are confident about the future, and about our
ability to grow profitably and satisfy our customers.
Thank you.
Cautionary notice
The speech contained in this press release includes forward-looking statements,
which do not refer to historical facts but refer to expectations based on
management's current views and assumptions and involve known and unknown risks
and uncertainties that could cause actual results, performance or events to
differ materially from those included in such statements. These forward-looking
statements include, but are not limited to, statements as to Ahold's strategy,
price investments, cost reductions, improvement of quality, service and customer
value, Ahold's dividend policy, Ahold's ability to augment its corporate
responsibility activities and reporting, Ahold's focus on healthy living,
sustainable trade, climate action and community engagement and statements as to
risks, uncertainties and other factors related to the economic environment.
These forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from future results
expressed or implied by the forward-looking statements. Many of these risks and
uncertainties relate to factors that are beyond Ahold's ability to control or
estimate precisely, such as the effect of general economic or political
conditions, fluctuations in exchange rates or interest rates, increases or
changes in competition, Ahold's ability to implement and complete successfully
its plans and strategies, the benefits from and resources generated by Ahold's
plans and strategies being less than or different from those anticipated,
changes in Ahold's liquidity needs, the actions of competitors and third parties
and other factors discussed in Ahold's public filings. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this press release. Koninklijke Ahold N.V. does not assume any
obligation to update any public information or forward-looking statements in
this release to reflect subsequent events or circumstances, except as may be
required by securities laws. Outside the Netherlands, Koninklijke Ahold N.V.,
being its registered name, presents itself under the name of "Royal Ahold" or
simply "Ahold".
[HUG#1403110]