Koninklijke Ad N.V. S/Adr

Ladies and gentlemen, good morning and welcome to the analyst conference call on the third quarter result of AHL 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, may be 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 statement. Such risks and uncertainties are discussed in the third quarter of 2020 and also in our hotel has a public findings and other disclosures. AHODO Hazard Disclosures are available on ahodohazard.com. Forward-looking statements reflect the current views of AHODO Hazard Management and Assumption, based on information currently available to AHODO Hazard Management. Forward-looking statements speak only as of the date they are made, and AHODO Hazard does not assume any obligation to update such statements, except as required by law. The introduction will be followed by a Q&A session, Any views expressed by those asking questions are not necessarily the views of Aarhus O'Hare. At this time, I would like to hand over the call to Alvin Concepcion, Vice President, Investing Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our third quarter 2020 results conference call. On today's call are Franz 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 investor section of our website, aroldarez.com. I ask that you please limit yourself to two questions. If you have further questions, then please re-enter the queue. I'll now turn the call over to Franz.

Thank you very much, Alvin, and good morning, everyone. I would like to start off by thanking the associates across all our local brands and support offices for their hard work during these challenging times. I'm increasingly proud of our team's performance. Their focus on the safety of our stores and distribution centers, as well as their service to our local communities, are commendable. In the third quarter, we enabled our teams by continuing to make important investments in additional safety measures and enhanced associate pay and benefits. For our communities, we also continued to make significant charitable donations. In total, we have spent 470 million euros on these efforts in the year to date. But despite the challenges we have all faced during COVID-19, we were able to produce another strong quarter of results. Natalie will go into more detail on the financial performance in Q3, as well as our outlook for 2020. For now, you can see in our press release and on slide four, some of the highlights. Overall, I'm pleased with the results. While the high growth in comp sales and net consumer online sales were aided by demand related to COVID-19, it wouldn't have been possible if not for our ability to leverage our leading local digital and omnichannel platforms, which we continue to significantly invest in. And despite the high level of cost related to COVID-19, we were able to expand underlying operating margin and growth diluted underlying EPS by 16% at constant exchange rates. The strong performance in the quarter allowed us to raise our full-year underlying EPS outlook for 2020 to grow in the high 20th range. We strive to benefit all of our shareholders and aim to strike the appropriate balance between investing in the health and safety of associates and customers, supporting our local communities, prioritizing environmental, social, and governance initiatives. Therefore, we're also announcing a new share repurchase program of 1 billion euros in 2021, which is a testament to the strength we expect to continue to see in our business model. On slide five, speaking of 2021, we know a lot of you are wondering what the future holds for Algalis. In short, we think the future is bright, and many consumers have found a new love for eating at home. Many households, including my own, discovered cooking skills they never knew they had, and they enjoyed it. Others who are more challenged with time and haven't quite yet developed their cooking skills discovered many delicious and convenient meal solutions we offer. Many households also discovered the strength of our assortment, particularly in fresh and healthy items. They have found ways to save money and extract even more value, such as through our loyalty programs, our competitive price points, and through our exclusive own-brand offerings. They have found new ways to engage with us, whether that is in-store with contactless payment options or through our convenient click-and-collect and delivery options. We think a lot of these attitudes and behaviors will be sticky in the future, and we will continue to adapt as new behaviors develop. While 2020 will be a record year by nearly any financial measure, we know it's also a time we have to lean into our strength to continue driving our business forward in the future. And despite the undoubtedly tough comparisons starting next spring, we see continued strength in our business model and are able to commit to another 1 billion buyback program in 2021. You heard me say lean into our strength. This means we need to continue to innovate and continue to please our customers to retain our title as number one or two market share across all our markets. Importantly, we need to maintain the consistent financial discipline and operational excellence which you have to come to expect from Albales. I want to spend a bit of time today to discuss some of our early initiatives. to solidify our position as an industry-leading local omnichannel retailer and increase our share of the customer's wallet in 2021 and beyond. On slide six, you can see that our initiatives center around three areas. One, significantly stepping up our online capacity, supply chain, and technology capabilities. Two, advancing our omnichannel offerings to consumers, and three, addressing the call to action in ESG. I'll dive into each of these points a little bit more in detail, but keep in mind the initiatives we highlight today are by no means a complete list. It's just a preview of some of the things that we are up to and the direction we're headed. On slide seven, you see some of the investments we are making to step up online capacity, supply chain, and technological capabilities. As many of these areas were challenged, during the demand spikes of COVID-19. And today, I'm proud to say that our US business reaches approximately 90% of households in our markets with home delivery and click and collect, and around 70% with same-day options. In 2020 and 2021, cumulatively, we are increasing our online capacity by nearly 100% in the US. This includes the expansion to nearly 1,400 click and collect locations by 2021, which will double the number of locations we had at the beginning of 2020. In Europe, our online capacity is increasing by nearly 50%, and this includes an over 50% capacity in bold.com in 2020 and 2021. To better serve customers, recall that in December 19, we announced that we are improving the US supply chain capabilities by moving to a fully integrated self-distributing model beginning in 2023. So far, we are progressing on our deliverables ahead of schedule, and the first integrated distribution center of the transformation initiative will go live in 2021. In Europe, we will improve our technology capacity capabilities by doubling electronic shelf labels to over 50% of our grocery stores in 2021 versus 2020. and nearly all Albert Heijn and De Les owned stores will have this by the end of 2020. Electronic shelf labeling will help improve productivity and save cost. As an example, it allows us to offer dynamic markdowns to improve turnover on aging fresh items, which reduces shrink, allows for faster price changes, and improves labor efficiency, of course. And in our to-go market at Albert Heijn, we are enabling tap-and-go solution for customers, which means there's a self-checkout component to this as well. Finding cost savings and enhancing productivity with solutions such as this are part of our culture at AHODLS and help us to stay on track to achieve at least 1.9 billion euro cumulative cost-saving target by 2021. On slide eight, We have a lot of exciting advancements for omnichannel consumers in the U.S., with many, many more to come. As many of you, our brands have offered subscription plans for years, and they have quite a loyal following by consumers. But we always look to improve our offerings. Therefore, the giant company will test a new subscription offer in the first quarter of next year, with an annual membership fee under $100. improved value proposition, and preferential delivery slots. We believe this improved subscription offering should lead to both increased loyalty and engagement. The U.S. will also offer an endless aisle solution with additional 80 to 100,000 general merchandise and food items in the first half of next year, utilizing the Miracle platform. We also focus on offering even more value to consumers, And to do so, our US brands will launch 1,500 to 2,000 more own brand items in 2021, growing from the existing base of 15,000 items. The stop and shop remodeling program in the US will be accelerated in 2021 with approximately 60 additional stores versus the 30 or so expected in 2020. The remodeled stores are performing well with sales lists in line with our expectations. On slide 9, you see that the European brands are staying on the leading edge of innovation with some exciting launches that will be rolled out more broadly. In July, Albert Heijn launched a home delivery service in the Antwerp region of Belgium, which is off to a very promising start. In August, Bol.com expanded to the French-speaking Belgium in Brussels and Bologna. This allows us even more flexibility to reach us even more customers, and the brand has already managed to attract thousands of Belgian third-party sellers. Mega Image in Romania launched, for example, a 90-minute home delivery offering in the capital of Bucharest in September. And also in September, Albert Heijn initiated a no-fee home delivery service in its first market in the Netherlands. The program targets smaller households, and will expand to additional geographies in next year. To date, Albert Heijn has remodeled over 200 stores to its new fresh and technology-focused format and plans to remodel 170 more in 2020 and 2021, cumulatively. The stores are performing well and are providing an uplift in sales and customers relatively to the control group. The COVID pandemic has highlighted the importance of our commitments to enable healthier and more sustainable diets, as well as in supporting our local communities. There is increasing customer demand for healthy and sustainable products and services, and they want to engage with customers with strong values, with companies with strong values. We have many initiatives to enable healthier eating, drive down waste, increase the transparency on the products we sell, and reduce our carbon emissions. We strive towards improvements in diversity and inclusion and do our part to better protect human rights. On slide 10, you see a list of longer-term ESG targets as it relates to many of the key issues for us. You may have seen many of these over the past year, so I won't cover it again, but please do take a look and also look at our website and annual report where more details are available. On slide 11, you can see some of the recent initiatives in ESG, but one I would like to highlight is an interesting program in Belgium where Deleuze has taken steps to make eating healthier easier by ramping up permanent price reductions for so-called Nutri-Score A and B products, which led to a launch of the Super Plus loyalty program in October. We look forward to share more details about this program in subsequent quarters. Slides 12 and 13 highlight some of the key achievements in Q3 for the US and Europe. And in the interest of time, I won't cover all of these, but would note that after seeing 115% growth in the US online sales in the third quarter, we now expect over 90% growth in the US online sales for the full year of 2020. And this is another upgrade from our previous target of 75% growth. Also, the stop-and-shop remodeled stores continue to perform well. Let's move over to Europe. We were pleased with the market share gains in both the Netherlands and Belgium in the third quarter, which shows the continued strength of our Benelux ecosystem. But also our CSE countries holds its strong share as well. Bol.com continues to perform very strongly with 46% net consumer online sales growth, including 73 growth in sales from third-party sellers. And there are now about 37,000 merchants on our platform, and it continues to grow. I'll now hand over to Natalie.