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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.

Good morning, and thank you, Frans. Our third quarter was very strong and continues to be impacted by high levels of demand due to COVID-19. albeit at a less than what we saw in Q2 as hoarding behaviors subsided and lockdown measures generally became more relaxed during the third quarter, allowing consumers to eat away from home a little more. As a result, net sales grew 10.1% at constant exchange rates to 17.8 billion euros, and group comp sales, ex-gas, were 10.5%. Group comparable sales were impacted significantly, by demand related to COVID-19. Net consumer online sales grew 62.6% at constant rates in the third quarter. This was driven by strong demand from both existing and new customers, as well as by accelerating investments in our online business to rapidly expand our capacity in both the U.S. and Europe. Underlying operating income increased 15.9% at constant rates to 813 million euros, with underlying operating margin up 20 basis points to 4.6% at constant rate. This was largely due to offsetting leverage from higher sales related to COVID-19. This was offset partly by ongoing costs related to COVID-19, which amounted to approximately 140 million euros in Q3, bringing our year-to-date spend to approximately 470 million euros. Underlying income from continuing operations for the quarter was €530 million, up 12% at constant rates. On a reported IFRS basis, however, income from continuing operations was €68 million, largely impacted by a €577 million pre-tax provision for the previously announced withdrawal from the National Pension Plan. As we repurchased €186 million worth of shares in the quarter, which brings that amount to 705 million year-to-date, we saw diluted underlying EPS in the quarter come in at 50 cents, an increase of 15.9% at constant rates. Moving on to our performance, third quarter, looking at it by segment. Net sales in the U.S. grew by 11.3% at constant rates to 10.9 billion euros. U.S. comp sales ex-gas increased 12.4%. Brand performance was strong across the board, with highest growth rates coming from Food Lion and Giant Food. Stop and Shop also had strong results. Another important call-out on the U.S. top line was our online sales, which increased by 114.7%. Click and Collect was a significant driver of this growth, and we ended the quarter at 883 points of sale, up from around 700 at the start of the year. The underlying operating margin in the U.S. was 4.6%, up 20 basis points from the prior year, driven largely by operating leverage from higher sales growth due to COVID-19. Lower shrink and labor efficiencies also helped this development, offset in part by significant costs related to COVID-19. In Europe, net sales in the third quarter grew by 8.3% to nearly 7 billion euros, This was a strong development but continues to be slower than the U.S., due in part to the lower shift in eating from home since wallet share of food eaten away from home was generally lower in Europe to begin with. Europe's comparable sales increased by 7.5%. This improvement was led by our brands in the Benelux market. Growth was more muted in Central and Southeastern Europe due to a higher level of consumer lockdown restrictions, reduced tourism, and lower demand in urban centers where many of our stores are located. All of these developments translated to market share gains in the Netherlands and Belgium and stable share in Central and Southeastern Europe. Net consumer online sales in Europe grew 48.6%. At Bol.com, our online retail platform in the Benelux, which is included within the Europe segment results, net consumer sales grew by 45.6%. The big driver of this development was Bol's third-party sales, which grew 73% in the quarter. Europe's Q3 underlying operating margin was 4.3%, down 50 basis points from the prior year. Operating leverage from higher sales growth was largely offset by higher costs related to COVID-19, as well as an 11 to 12 million euro pension expense in the Netherlands during the quarter, as well as lapping one-time items that benefited our margins in the Netherlands from the prior year's quarter. Both of these items were flagged in last earnings call. Moving on to free cash flow, the cash position of Avodalez remains strong. Free cash flow in Q3 was 176 million euros, which compares to 484 million last year. The COVID-19 impact on profits drove a significant operating cash flow increase. This was offset in part by $134 million unwind in working capital at the end of the quarter as inventories in store continue to return to more normalized levels after initial shortages experienced in the earlier stages of COVID-19 crisis, particularly in the U.S. In Europe, the increase in inventory is mainly caused by Bull.com as we prepare for the high season in Q4. Taxes had an unfavorable impact of $145 million due to higher income from COVID-19 impacts, as well as tax payments in the Netherlands. If you recall, in the Netherlands, we paid the full amount in Q1 in 2019. This year, we have paid it more evenly throughout the year. Net capital expenditure was 601 million euros, up 78 million from last year, as we accelerated and increased omnichannel investments in the quarter. Moving on to the outlook for 2020. I'd like to mention that despite the uncertainty generated by COVID-19, we are again raising our outlook on underlying EPS growth due to our strong year-to-date performance. Let's start with underlying operating margin for 2020, which is still expected to be higher than it was in 2019. There's a lot of uncertainty in the remainder of the year, but embedded in this margin outlook is the lower margin rate in Q4 compared to what we have seen so far this year. This is due to our expectation that comparable sales growth will moderate further relative to Q3. Although Q4 comp sales are expected to moderate versus Q3, as I mentioned, we do not expect that moderation in cost as they're related to COVID-19 relative to what we saw in Q3. This creates an operating deleveraging effect. We will also be making additional investments to further accelerate our digital and omni-channel capabilities. and will be impacted by an increase in the online sales mix in the fourth quarter. There are a few smaller items to remind you of, which also unfavorably impact margins for the remainder of the year. In Europe, recall that there are higher pension contributions in the Netherlands at a run rate of 11 to 12 million per quarter. In the U.S., there are 45 million euros in U.S. supply chain transformation costs in 2020, which are more back-end loaded. And while we do have the 53rd week, which benefits our Q4 results, the pressures I discussed will outpace these benefits. Moving on to our EPS outlook for 2020, we are raising our guidance to the high 20% growth number from the low to mid 20% number we had announced last quarter. This guidance reflects our strong performance year to date, despite lower margins in the fourth quarter. Our 2020 free cash flow outlook is also being maintained at at least 1.7 billion euros. It's important to note that the underlying level is even higher, as it also includes the effect of paying the majority of our 577 million euro pre-tax obligation related to our withdrawal from the national plan that we announced over the summer. Our capex for 2020, which we are maintaining the guidance of 2.5 billion euros Remodels were slower in the earlier part of the year due to COVID-19 closures and labor availability. However, this is being quickly offset by our decision to accelerate the digital and omnichannel investments to support the step change in growth that is clearly underway. Our dividend policy sets the dividend payout at 40% to 50% of underlying income per share, and as of today, We are a little more than 80% through our 2020 1 billion euro share buyback program. As Franz mentioned, we are planning a new 1 billion euro share buyback program for 2021 due to the strength and cash flow that we see in our business model going forward. While I'm sure many of you would like to hear what our broader financial outlook is for 2021, our normal practice is to provide this during our Q4 results in February. And with the high level of uncertainty caused by COVID-19, it's more challenging than usual to forecast. We will provide this update in due course with our Q4 results next year. That said, uncertainty in the marketplace won't stop us from moving forward and finding new ways to adapt to changes we are seeing in consumer shopping behavior. Thank you, and now let me hand it back to Franz.

Thank you, Natalie. So let me wrap up quickly. who had strong third quarter performance, which was impacted by increased demand from COVID-19, despite all the significant costs that come along with it. Our online business grew significantly and should continue to grow solidly. Therefore, we expect to reach our 7 billion net consumer online sales in 2020, which is in fact a year ahead of plan. Due to the strong performance in Q3, we are again raising our 2020 outlook for underlying EPS growth in the high 20% range. We are reiterating our free cash flow target to at least 1.7 billion, even though we plan to pay a significant amount to withdraw from the U.S. multi-employer pension plan and spend 2.5 billion euros in capex this year. We announced initiatives to solidify our position as an industry-leading omnichannel retailer in 2021 and beyond. including a significant step up in online capacity and supply chain capabilities, increased use of technology to enhance productivity, advancement in omnichannel offerings to consumers, and addressing the call to action in ESG. Lastly, we are authorizing a new 1 billion euro buyback, share buyback program for 2021, which is a testament to the strength we expect to continue to see in our business model. So let us move to the questions, and we're happy to take your questions. Operator, could you please proceed?

Thank you. Ladies and gentlemen, to be registered for the question and answer queue, please press star one. To remove a question, please press star two. When asking your questions, be aware that everyone on the call can hear background noise, so please keep this to a minimum. If possible, don't call hands-free or use the speaker. In order to allow enough airtime for all participants, we would like you to limit the number of questions to two. Please stand by for a moment as we wait for participants to register for the queue. Thank you. And the first question is coming from Mr. Spencer Hannes Wolf Research. Please go ahead.

Good morning. Can you guys talk about the cadence of U.S. comps during the third quarter? And then how are comps trending in the fourth quarter in the U.S. and also in Europe, where I think coronavirus cases are rising today?

Good morning. I'm happy to take that one, and thanks for being with us so early. If we look at how our comps have developed in the third quarter, specifically in the U.S., what we saw is basically from the second quarter, You know, kind of a consistent, you know, very modest slowdown in terms of the sales, with a couple little peaks and spikes if we wanted to look at it week by week, but generally on a monthly basis. And we expect that to continue in the fourth quarter. Again, we may be in one of those spots at the moment. The last couple weeks we've, I think, seen a little bit more in terms of closures. But our expectation is they will continue to moderate in the fourth quarter.

That's really helpful. And then on market share, any additional color you can provide about your performance in the U.S.? And then more specifically, did you gain share at Stop and Shop in Q3Q?

Yeah, we don't have market share information available for Q3 yet. That's always – we get a little bit after the quarter. So what I've got for you is Q2. But what we did see there was that all of our brands in the U.S. gained share, including Stop and Shop, which had a nice share gain during the period.

Great. Thank you.

And the next question is coming from Mr. Andrew Porteous, HSBC. Please go ahead.

Hi, morning, team, and well done on another good set of key threes. A few questions from my end. Can you give us a little bit more detail around sort of Bold.com, just in terms of, you know, where GMV sits now? What are you seeing in terms of profitability there? Because I know that, you know, that's a business that's seen a lot of growth and perhaps is a little hidden away. The second question was on the profitability of your online grocery business. Have you seen profitability improve there in terms of home delivery? And then also, perhaps, if you could comment on the sort of channel mix, whether that's helped profitability with a move towards click and collect as well. And I'll leave it there for the moment.

Thank you, Andrew. On ball.com... A couple of things, we already mentioned 45% growth in online sales and within the 45% our Platza partners grew with us 73%. So that is strong growth for Ball and not only in the Netherlands but also in Belgium. We launched a French-speaking version of Bol.com also to serve our Brussels and Wallonian customers, and we think that we also can pick up a share there. In the Belgian market, we're also growing very fast, and we're growing very fast with Bol.com, but also with the Belgian Platza partners, the merchants there as well. So that's very positive to say. And the other thing is that if you look at Bol, and we mentioned this to you earlier, It's also an EBIT positive company, and we're very happy with that development there. We have enough capacity with Ball because we, on time, increased our capacity with our warehousing. We have a very good relationship for our last mile. And I think if you compare this to a number of competitors in the markets, that we have a very reliable product where we understand our customers in the Netherlands and Belgium very well. and also we are comfortable with our present positioning when we talk about price. On the online profitability part, let me give Natalie a little bit, so that she can give you a little bit more information on that, on the leverage there.

Yeah, I think when we look at the e-com profitability, I mean, you know how, on the one hand, how strong our sales have grown in the quarter and year to date, which we're really proud of. but also on the profitability piece. We are seeing you're exactly right in terms of in the U.S., you know, a transformation in the shape of our business, that the click and collect business is, you know, was below 700 points at the beginning of the year, and we're now at over close to 885, and that'll be 1,400 by the time we end next year. So we're doubling our capacity in the U.S., not also on home deliveries, And so that ability to have better capacity, the higher demand, has definitely led to improved profitability both in Europe and the U.S. We still have lots to learn. I think this is early days. But we're very pleased with the development, and it's a key focus as we look at e-comm. It's on the one hand about growth, but making sure that we're doing really smart growth as we develop.

And then also from a strategic perspective, also our online product in the U.S. and in Europe is proprietary product from the front end, the monetization, the type of customers we have. So I think that's also strategically a very solid position where we are. Thanks a lot.

Can I ask a quick follow-up on self-distribution as well? Are any of your competitors in the U.S. able to do self-distribution?

On the East Coast, most of them do. And therefore, it was for us, let's say, a necessary but also very smart move to have that transaction last year. And the project is running up to 2023 so that we have quality of time and operations to transfer the warehouses, to transfer the operations, to make sure that IT and technology is also following properly. And as I said earlier, we are ahead of plan here. And I think this strategically, but also from a cost perspective, I think a very smart thing to do. Thanks.

And the next question is coming from Nick Coulter City. Please go ahead.

Hi, good morning. Three, if I may, please. Firstly, can I come back on the working capital and the overall inventory build? It sounds like U.S. inventory was sequentially down quarter on quarter, but I just wanted to check the shape. There's obviously quite a lot going on within working capital and particularly inventory. And then secondly, for online grocery in the U.S., and noting your reference to capacity, would you be able to share a kind of a sense of your weekly order capacity or volume in the U.S. at the you'll be seeing elevated basket sizes given the pandemic. And then lastly, just to pick up on the endless aisle concepts with the Miracle Marketplace that you mentioned in the release. Could you talk a little bit more about that opportunity and I guess the puts and takes of using a third party versus importing your know-how from Bol? Thank you.

Natalie, we'll come back on the working capital question, Nick. On online, a miracle. We are very happy with the capacity we have now available in online. So we have no capacity constraints at the moment in the US, although we grew 115% this quarter. And Natalie already mentioned that by the end of next year, we will have 1400 click and collect locations, doubling the capacity there. But also on the delivery side, we don't have a shortage of capacity. And so we are very happy with this. The Prism platform, which is an online e-commerce platform, helping us not only the front end, but also helping us with the store pick processes as well, is doing very well for us. And it's a logical next step that if you are a grocery retailer, but you see opportunities with a lot of customer traffic, that you also can extend your services with general merchandise as well. And therefore, the partnership with Miracle going to be started next year with that amount of new items gives an opportunity for customers to have a more convenient full shop. And you can imagine that a lot of items close to food, if it's food preparation, if it's culinary, if it's kitchen, but also a number of non-food convenience items might be a very nice addition to our total offer. So that will be connected next year. We start with this at the end of the first quarter, and we start with one of the brands in the U.S., and it gives a nice opportunity to extend our offer, hopefully also have an even stronger margin mix, and partnering up with Miracle means that it's not our stock, let's say, it's not our working capital, but is extending the offer in total with general merchandise.

I was just asking on the audible, it says, also to try and get a handle on your investment and the costs going into online. I don't know whether it's possible to get a sense.

We don't disclose the order volumes and these type of things, Nick, but what I would like to share with you is you saw the sales numbers, you saw the information that we are not capacity-constrained. But we don't release order numbers per week or per fulfillment methodology whatsoever. But we grow, of course, much faster with click and collect versus the online delivery model.

Super. Thank you.

On working capital, Natalie.

Yeah, on working capital, Nick, thanks for the question. You know, what you saw was, you know, I think just the very normal unwind after the spike that we'd seen in the second quarter. So, you know, our inventories were back at, I'll say, more normalized levels, particularly in the U.S. There's one little anomaly to that, and that's in Europe. You know, when we look at bull.com, I think I mentioned in the prepared statements that, you know, we're expecting a strong Q4, and so we've built some inventory there. But otherwise, that number's come down.

And do you expect any transitory impact from the supply chain work that you're doing or all that just washed through?

No. I think we are very proud of what our supply chain team in the U.S. is doing, and also the transformation of that project from the CNS into self-distributing models is going very well, very solid. We take time to make sure that we have no risks here, and as I mentioned before, we are ahead of time schedule, and we are well within the costs and the investments which we gave you before.

Thank you.

And the next question is coming from Mr. Andrew Grin, exam. Please go ahead.

Yeah, good team. Yeah, two for me. So the first one, I'm a classic, I'll hold the last question, but the guidance for the full year implies really quite a subdued Q4. So I'm just trying to, particularly thinking about free cash flow, but also to degree on the EPS side. I'm just trying to measure how much prudence there is in there. You've obviously noted significant uncertainty. And I know it is generally the style of Arval Deleuze to play things cool, as it were. The second question, just coming back to online, I'm thinking actually more about some industry view. Clearly, there's a question about immediacy versus next day. There's also questions about, you've alluded to it there, but click and collect. I'm just wondering how you expect the industry to play out, maybe also within that the ability of some of the smaller players in the market to keep up with investments that you and some of the other big players in the US are making. Thank you very much.

Thank you. I think the first remark was more a comment, I think, than a question. That's how I would see this. On the online view in the future, I think Nathalie already alluded to this, that we are very happy that we have this click-and-collect, pick-from-store capacity growing, and we see also that there the growth is stronger than in the delivery part. We also mentioned to you overall that we will have an online sales of $7 billion by the end of this year, a year well ahead of the original plan. And we also see that online in grocery has accelerated what will be sticky after the COVID-19 surge. So what do we see? We see that the type of fulfillment models will be still varying. And we think that we have to offer all of them, if it's the same day or if it's the next day or it's delivery or pick from store options. And customers are very different to the requirements and demands, and they just pick and choose, and we give them that choice. So that's doing very well. We're leveraging also our costs by doing so, so that's also a positive. And if you look at the European markets, where in the Benelux it's very much a delivery type of market due to density, customer expectations, and these kind of things, also there we geared up our capacity. And as I mentioned before, in the Dutch market, we're growing 55%. and we are market leaders, as you know, and also there on the online frame. So contact us, COVID, acceleration of online, moderating over time that growth levels, of course, but we are accelerating with our online services, and we have enough capacity in the U.S. We added 40% capacity in the Dutch market, and we add more capacity next year to deal with the amount, but we are very happy with also there our online shares.

And let me come back to the, I'll say the comment and question a little bit around Q4. First, if we look at it on the earnings side, what we're expecting is obviously a continued deleveraging of the top line in the fourth quarter. Our COVID costs look likely to remain very persistent as we're looking at the period. So there's just a deleverage that happens. That's the big driver. We've also got those costs that I mentioned related to Falcon, the Dutch pensions, the accelerating e-com growth that come in there. Plus you'll also see there's a tax headwind that we've got versus last year. So I think despite the fact that we have the 53rd week in there, we really do believe the guidance we've given is the most appropriate at this point. And to your question about cash flow in particular, this is one where we look at the fourth quarter. Remember the that majority payment of the national withdrawal is going to be coming in the fourth quarter, as are increased CapEx investments related to Omnichannel, and you're going to continue to see the unwind of our working capital as we move forward. So I think that's really the belief in terms of where we see the cash flow in Q4.

Sorry, could you just quantify the pension payments for Q4, loosely how much it will be?

We haven't quantified it, but what we've told you is it's the majority, and as you know, the number's around 600 million, so I'll let you do some good analyst estimates on that one.

Yeah, it's probably 350 or something like that, but perfect. Thank you very much. Thanks, guys.

And the next question is coming from Rob Joyce, Goldman Sachs. Please go ahead.

Hi. Thanks for taking my questions. So two from me as well. Just on the U.S., could you talk about the promotional mix in the third quarter in the U.S. relative to the second quarter and maybe some thoughts on food inflation outlook into 2021? And then on the online business, it's around just under 5% of sales in the U.S. Sorry if I missed it, but could you say what percentage of this is now click and collect? And in your markets in the U.S., what do you estimate online penetration is as a percentage of the total grocery market now?

Thank you. If you're having questions on 2021, we don't give guidance on those elements for the next year. But we can give you a little bit more clarity on what we see on promotions happening at the moment. Of course, during the second quarter in COVID times, promotions were down because stock was not there, so it did not make a lot of sense to promote items which are partly not available. And we saw in the third quarter that shelf availability picked up, although in the U.S. it's still not back at normal levels. And that's where I also saw, compared to the second quarter, the promotion levels picked up, but still below last year. And for the fourth quarter, what we expect is that the promotions will further grow in line with the availability of products and also in line with commercial plans of vendors and ourselves. But they will still most likely be low last year promotion levels, which is different compared to Europe. In Europe, we see more or less in the fourth quarter that promotion levels come back to normal levels like we saw last year.

Yeah, and let me add, I think there was a question about food inflation. You know, we don't give that information specifically about our company, but if you look at the CPI for the Northeast, what you saw is that in Q3 it was around 4%. It had been 5% in Q2. So I think, you know, there is a slightly declining trend there, but when we look at 21, we'll have to, you know, see how that develops. You also asked about click and collect as a percent of sales and how we see that in our U.S. business. I think what you could expect is that by the time we get to the end of the year, the share of business there will be very similar to home delivery. And when you asked about online penetration in the U.S., I'm not sure was the question about our business or was it more general in terms of the industry?

No, just in terms of the overall markets you're in, what do you see percentage penetration of online for the whole industry and the markets you're in?

I think if you look at the markets we're in and if you exclude the kind of, you know, I'll say the Amazon piece and look at more direct competitors, you would see that at, you know, numbers below 5%. Okay.

Thank you.

And the next question is coming from Ms. Sabina Caron-Kepler. Please go ahead.

Yes, so good morning, everyone. Two questions for me. The first one, I'm not sure I understand why you expect Like for Like to moderate in Q4, at least for Europe, because in Belgium and in Holland, we've got to lock down. So I'm just wondering, is it due to the U.S., where you see that consumers go back to restaurants despite COVID? This would be my first question. And the second question would be regarding bol.com. I don't know if it would be possible, but I think it would be useful in the future if you could try to single out Boll because it's a non-food business with different dynamics and we've got a lot of questions on this part of the business. And I was wondering today if you could tell us how much of the net consumer sales for Boll is done by third party today in percentage terms, please.

Thank you, Sabine. We understand the question on Boll and we think that we gave as much as information today as we did in previous times when we had a different segment reporting. So we tried to be specific about BOL when we talked about sales numbers, we talked about profitability, we talked about how many merchants on the platform, we talked about PlatZAT sales versus the total net online sales, net consumer sales. We talked about our geography in Belgium and in the Netherlands. We try also and we work very hard to build that ecosystem, of course, so that you have single sign-ons between BOL.com and the other brands we have so that you get a good connection between the BOL platform, which has a lot of traffic, of course, and the food and the ethos and how businesses. So that ecosystem is working quite well. Single sign-on is already there. Sharing subscription models is already there. But we see a further future in combining their ecosystems, both in the Netherlands, but also in Belgium with DELES, where there is more connectivity already with pickup points and so on. So that's on the ballpark. The second question was on... The second question was... That is mainly due to moderating sales we see on the U.S. side. On the U.S. side. And again, it's very difficult to check. I mean, if we have lockdown measures of a Dutch, Belgian, or whatever European or U.S. government tomorrow or last week, it's difficult to estimate the effects there. But it's clear when we have further lockdowns and restaurants are closed and educational centers are closed, and of course it has a positive effect on supermarket sales. But the effect we see, the moderation we see rather in the U.S. than in Europe, because in Europe it's at the moment rather stable. And we have to see how that works out with the lockdowns.

Okay. Thanks a lot.

Yep. And the next question is coming from Pauline Le Corso Noir, EOS at Federated Air Mass. Please go ahead.

Thank you very much for the presentation today. I just wanted to go back to the ESP agenda. It's clear that our whole DLS has made a lot of progress on key elements of its sustainability strategy, and it's very encouraging to see that it's some part of the presentation today. I wondered if you could maybe elaborate on the plan for plant-based food. Some peers have set a target And I hope this is something interesting to help provide the climate change agenda and build this healthy, safe product as well. Thank you.

Thank you very much, Pauline, for the question. And indeed, this is an integrated part of our business and also a thing where customers and investors are more and more interested in and also take us into the responsibility, which we happily do so. So you see a number of things on the ESG agenda. We also published already two years in a row an integrated report for financials and non-financial sustainability in the annual report. We also have, in June of this year, produced this inaugural human rights report where we were, yeah, I think also clear on the to-dos on the six salient issues which we would like to work on. But your questions on climate... We joined the science-based targets philosophy and organization, and we committed ourselves to half our carbon emissions by 2030 based on the 1.5% degree plan. And that is for our own operations, but in the total value chain. So we also committed ourselves to reduce emissions by 15%. That will be hard work. It's only 10 years to go. but we think it's absolutely necessary to bring our contribution there, and we see also opportunities. But also on the reporting, we're going to do a few things on climate, and maybe Natalie share a few things on TCFD, because it's very much linked as well.

Yeah, this is something we're really proud of, because instead of looking just from the inside out, we're also really trying to look from the outside in, and we've joined the Task Force for Financial Disclosures around climate, and This is really something where we have, in addition to, I'll say, looking at the strategy, the governance, how do we incorporate it into our everyday activities. We've also gone through a process this year, really, of starting to look at doing a detailed risk assessment, and we'll be making disclosures about that in our annual report when you see that at the end of the year.

Answering your question, Pauline.

Yeah, any plan for a target on France-based food, or is it something you have been reviewing? I know, for example, Tesco set one same target, I think, for 2030.

We haven't put any targets out there yet, but you did hear France mention today that at Albert Heijn, our big banner here in the Netherlands, we've actually just in the last quarter increased our vegan, vegetarian, and plant-based products, we've doubled that offering. So that's really something that's important to us, and you'll see us continue, I think, as far as, you know, on the one hand, really trying to be more transparent about the quality of our food. So that's one of the things we've put a big emphasis behind. And when we look there, you know, one of the ones that I'm particularly proud of is what we're doing in Belgium at the moment, where we've really integrated into our loyalty program, something where we're really looking at how do we democratize healthy eating. So we've created a loyalty program there where we're giving special discounts to products that receive an A and a B Nutri-Score rating. And we've seen, this came in October, and we've just seen an enormous uptake. So I think that's really the kind of thing that we want to do to say it's not just about providing the opportunity but really incentivizing people also our customers to, you know, eat in a more healthy way. Okay, that's very helpful. Thank you.

And the next question is coming from Mr. James Amstead, Barclays. Please go ahead.

Two pernickety questions, please, probably for Natalie. Firstly, and apologies if I missed the answer to this one, but the transition costs, which I think are 45 million euros this year, roughly what's left to hit the P&O in the fourth quarter? And secondly, on the pension contribution for the fourth quarter, which, you know, the majority of the 600 million euros, I don't know how far off the U.S. tax authorities are at giving you, you know, the tax rebates, basically, on that, because I guess you get 20-25% of it back through lower cash taxes. Is that something that you're saying is you get the benefit of the minute you put the gross amount in, or is that a benefit you get in your 2021 cash taxes?

Thank you. I think, James, acoustically it was not so easy to understand, too, but I think the first question is the supply chain investments, the backloaded for this year, the $45 million. And the second thing, have you understood the second question, Natalie?

I think it was just the timing, James. You were asking about when there would be the tax benefit related to our pension withdrawal contribution.

Yes, just understanding whether you get that tax benefit essentially immediately or whether that's something that perhaps you get in 2021.

Okay, so let me start on the supply chain side. We talked about the $45 million being back-end loaded, and I sort of reiterated today that it was maybe even more back-end loaded than what we had suggested previously. So do think that you'll see the majority of that in the fourth quarter. And with respect to the pension costs, as that comes in the fourth quarter, we will see when we make those contributions the offset, if it's not a big one, from the tax side in the same period.

Yeah, that's very helpful. Thank you.

And the next question is coming from Mr. Sridhar Mahamkali, UBS London. Please go ahead.

Yes, hi. Good morning. Maybe just two or three short ones. First of all, in terms of the U.S., are you able to give us an idea, even if it's direction and commentary, that's great, in terms of sales growth or comps by banner versus the headline comps? 12.4% above, below that average is just helpful. And secondly, just going back to the promo environment earlier on to Rob's question, are you able to talk a little bit more in terms of geographies, please? Is Northeast very different to Southeast in terms of the current trading environment in terms of promotions? That's the second one. And third one, very short one, is you talked about stop-and-shop remodels, acceleration, and they're still doing a really good uplift. Just curious to know what the outperformance in terms of year one sales performance is running at the latest batch of remodels, please.

Thank you. Thank you very much, Sridhar. The sales growth numbers, of course, with a strong number like a 12% comp sales in the U.S., There's a slight difference in brands. Natalie already mentioned to you that all our brands gained market share in the second quarter. So all brands did very well. And especially also Stop & Shop, by the way, had a very strong market share gain in the second quarter. But not... Lower numbers with Stop & Shop in the sales growth on the comp part. So that's where the spread is.

Sorry, Frans, I think we might have lost you just as you were explaining it all. I don't know if I lost you.

Can you hear me now?

I can hear you.

Oh, okay. Sorry about that. It was unintentionally straight there. No, no, no. So what I tried to say is, first of all, the 12% comp sales for the quarter, a strong number. All brands, of course, positive. That's clear. All positive in volume. That's also clear. Second quarter, all the brands gained market share, strongest market share gains with Foodline and Stop & Shop in the second quarter. At the moment, in the third quarter, when you see the spread, the bandwidth of growth, then Foodline is on the higher side of the bandwidth and Stop & Shop is on the lower side of the bandwidth in total sales growth. In the south, we know there is more growth because there is more population growth as well, and there is not a lot of population growth in the northeast, but that is a story which we already have in our books for quite some time. So very happy with the overall sales growth numbers and also very happy, therefore, with the remodeling of the stores in Connecticut and Long Island and also the next batch. Those brands, those stores are doing very well, are doing better than Proforma. And also, if you compare it like for like in COVID times with other stores, are doing roughly 3%, 4% better than the control group. So we're very happy with that performance. That's why this year, roughly 30 stores more. For next year, 60 remodelings in specific clusters for Stop & Shop. And we're very confident that the team has found out what customers like the most after the first batches of experiments in Connecticut and Long Island. So that's doing very well. And I think those were your questions, right?

Just to clarify, Giants is outperforming Stop & Shop in that case by a fairly good margin, both Giants. And just in terms of promo environment, Northeast versus Southeast, if there's anything at all you can talk about, please. You now talk about margins, which we... Oh, no, no, no, sorry, not margins, promo environment.

No, I wouldn't say that. I would just make the difference between the northeast and the south, and that has a lot of things to do with population growth, and I think it's not new for you guys that Food Lion is doing an excellent job there, but also after a strong investment round, as we know, and we see now the same uplift coming with Stop and Shop. and we have 400 stores there. We have done roughly, by the end of next year, more than 100, so we're on a good trajectory there, and we are very happy with what we see so far in the reaction of customers to those remodelings.

Thank you. And the next question is coming from Mr. Arnaud Jolie, Societe Generale. Please go ahead.

Yes, good morning, everyone. I just have one follow-up question on bol.com. When we look at Amazon, strong drivers for profitability are advertising data and logistics services, and more generally speaking, B2B services. Where is bold.com on this key topic?

I'm sorry, could you repeat the question? I actually didn't understand what the question was out of that.

On bold.com, but what was exactly the question?

Yeah, I mean, when you look at some other, you know, online players, they are really creating an ecosystem with, you know, some, of course, you have the core businesses, but you have advertising, data, logistic services offered to the third parties. So in all these key topics, I'm just wondering where is bol.com at this stage?

Yeah, okay, sure. Let me give you a little bit more color on the profile of dolbol.com. Dolbol.com is, of course, operating in the Benelux markets and has a very deep reach in the Dutch markets, of course, and also an increasingly deep reach in Belgium and not only in Flanders, but now also in Bologna due to the language model we have now. So the second thing is... I think one of the strongest things of Ball is that they have a very strong last-mile product, and not only in quality but also in reliability of if they say next day, it's there. If they say in two days, it's in two days there, which has been very highly appreciated by customers, the reliability in itself. And we have some other online players in the Benelux markets which are not that reliable, I would say. The second thing is that they know their customers very well because they, of course, have a high knowledge about the Dutch and the Belgian customers. And that also reflects in the type of merchants they have on the platform, 37,000 in the meantime, but also is reflected by the type of offers, if it's language or culture or understanding what customers want from us. And I think that's going very well so far. And, of course, we have other competitors in the markets, bigger and smaller ones. But I think so far with the type of capacity investments we made, with the digital connection, with the digital marketing elements, with the assortments and the growth of the assortment, and also the connectivity with the food brand Albert Heijn and Deleuze, I think that's creating an ecosystem which is more unique, hopefully also more unique, than others can offer. So that's what we're working on, and I think so far a lot of things are getting further integrated in that offer and make it more convenient even for customers to have those shopping journeys, which are not only general merchandise, but also general merchandise and food in the combination. I think that's a big chance for us.

Okay, thank you very much.

And the last question is coming from Miss Victoria Petrova, Credit Suisse. Please go ahead.

Thank you very much for letting me ask two questions. Question number one, if you could look at your like-for-like sales in Europe and U.S. for the third quarter and you were to strip out impact of COVID, what your like-for-likes would have been? Or could you maybe split 50-50 or 60-40? in terms of impact on like-for-like. This is question number one. And my question number two, in your current fulfillment, you have a very strong online growth. Could you maybe comment on what percent of your U.S. sales is going through take-off micro-fulfillment center, and what percent of your sales is going through Instacart? Thank you very much.

I'll take those two questions on the like-for-like sales in Q3 ex-COVID. You know, that is something internally that we try to look at and say, hey, what do we believe that development is? And what I can tell you is that our comp sales in the third quarter, ex-COVID, would have been above our normal historical levels. I think, however, there's a lot of, you know, puts and takes in those numbers, so it's not a number away to say, hey, let's put a specific number out externally. And on your online fulfillment, I think there was a comment about what percent of our sales are going through micro-fulfillment and what percent of sales are Instacart. We don't disclose either of those numbers. On Instacart, I can tell you our collaboration with Instacart, I think, as a percent of sales is probably quite a bit lower than what you would see with most folks out there. Our focus is really on our proprietary systems, although we're pleased with our collaboration with Instacart. And on micro-fulfillment, that's still a pretty small part of our business, but it's definitely something where As we look at going forward, it's a real focus for us.

Thank you very much.

Okay, great. This is our last question, so thank you very much. This concludes our conference call and webcast. Thanks for joining. Please take care. Have a nice day.