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Ladies and gentlemen, good morning and welcome to the Amnesty Conference call on the third quarter 2021 results of AHL Dalhousie. 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 statements. Such risks and uncertainties are discussed in the Interim Report, 3rd Quarter 2021 and also in Ahold Delhaize, Public Findings and Other Disclosures. Forward-looking statements reflect the current views of AHEL Delhaize Management, an assumption based on information currently available to AHEL Delhaize Management. Forward-looking statements speak only as of the date they are made and AHEL Delhaize 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 AHEL Delhaize. At this time, I would like to hand over the call to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. I'm JP O'Meara, Head of IR, and I'm delighted to welcome you to our Q3 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 at www.aholdelez.com. To ensure everyone has the opportunity to get their questions answered today, I ask you to initially limit yourself to two questions. If you have further questions, then please re-enter the queue. Before I turn over to Franz, I would like to remind you of our upcoming Investor Day which will be a virtual event held on November 15th at 2 p.m. Central European Time, 8 a.m. Eastern Time. We are excited to share our vision for the future and look forward to you joining us. I'll turn the call over to Fran.

Thank you very much, JP, and good morning, everyone. Our Q3 results once again showcased the strength of our omni-channel business model. As our local and trusted brand, showed resilience, building further on the 2020 COVID-related sales gains. The pandemic continues to underpin the importance of maintaining food and product supplies to local communities, a vital role that we remain focused on fulfilling. And we remain thankful for the efforts of associates who have put a consistent emphasis on safety, while at the same time providing great customer service and community support. The quarter also did not come without some unexpected external challenges. Our businesses, and especially the communities we serve, faced disruptions from the Belgian floods, tornadoes in the Czech Republic, fires in Greece, and Hurricane Ida in the U.S. But as always, our associates acted swiftly, and a dedication to their communities during these difficult times truly lived up to our core values. For that, I'm truly grateful. To meet associate, customer and community needs. And we are aware of the recent increases in infection rates in many of our markets and will continue to provide assistance in all our communities, including COVID-19 vaccination efforts in the US. For 2021, we remain on track to deliver on our pledge to contribute €20 million in COVID earmarked charitable donations, spread evenly between the US and Europe. A top priority is also our continued support of COVID-19 related health and safety measures, where we invested €66 million in the third quarter. Now let me highlight our key financial results. Overall, we are very pleased with the underlying Q3 performance in both the US and Europe, as we were able to grow sales and profits on top of a very strong quarter in the year-ago period. We have been able to retain a strong level of underlying consumer demand by continuing to adapt to the enduring consumer behavioural changes. This strong result comes against a backdrop in which several communities across our markets reopened, suggesting that many consumer habits formed during COVID-19 pandemic favoring food at home consumption and a focus on healthier eating are proving resilient. We have and will continue to make significant investments to address these trends. Central to this and all of our strategies is our omnichannel platform, which continued to drive strong market shares during the quarter. Our online business posted strong double-digit growth in its third quarter with these trends expected to continue. Due to the strong growth and continued save for our customer initiatives, our underlying operating margins were again very strong in the context of levels prior to COVID-19. And as a result, I'm pleased that you once again raised our 2021 underlying operating margin, underlying EPS guidance, and the free cash flow guidance, reflecting the strength of our year-to-date results. Next, we go into more detail on the third quarter financial performance, as well as a detailed outlook for 2021. But first, let me move on to slide five and spend a few moments on our omnichannel proposition, where we continue to go from strength to strength, where it is bringing new unique customer-facing experiences, or evolving the speed and efficiency of our operations each quarter, we are driving noticeable change. For example, our US supply chain transformation continues as planned, with 65% of our center store volume now self-distributed, up 50% versus last year. And we are on our way to being 100% self-distributed in 2023. We opened this week our new automated e-commerce fulfillment center in Philadelphia for the giant company, which will allow us to drive increasing efficiency and productivity gains. Our giant company, Henefert, and stop and shop brands in the US have recently introduced new 30 minutes delivery services, including fresh, prepared foods, and essential household products. Albert Heijn in the Netherlands has launched a new subscription service Albert Heijn Premium, becoming the first food retailer in the Netherlands with a subscription plan. And to encourage healthier eating, the service offers extra savings on the wedding products, as well as discounts on our bol.com and GAL&GAL subscription programs. And in Q3, our brands in Central and Southeastern Europe have expanded their online grocery delivery services. For example, Greece has expanded to another three cities, and the Czech Republic has significantly expanded their online offering to 350,000 people. This all serves to underpin our relentless focus to be the industry-leading local omnichannel retailer in all of our markets. And by capitalizing consumer changes through our unique, fresh, healthy, and private brand assortments as their local and trusted online and offline destination to drive retention, acquisition, and increasing share of wallet over time. Moving on to our regional performance, slide six highlights some of our key achievements in the US. The third quarter, US online sales grew by 53%, bolstered by the continued expansion of our click and collect capacity, as well as our fresh direct acquisition. Speaking of click and collect, we opened 102 additional click and collect locations during the quarter, and remain on pace to end 2021 with approximately 1,400 click and collect locations, up from 1,100 at the beginning of this year. We also remodeled 11 additional stop and shop stores in the third quarter, bringing the total number of stores remodeled since the inception of the program to more than 110. And we continue to see solid sales uplifts from our remodeled stores. Finally, from a brand perspective, I'd like again to call out FoodLine, our fastest growing grant in the US, which achieves its 36th consecutive quarter of positive comparable sales growth. And in addition, the 71 recently added stores in early 2021 have now been fully integrated and are exceeding sales expectations. Slide 7 highlights some of our key achievements in Europe. Our Benelux ecosystem continued to perform well and we gained market share in the region during the quarter. This was driven by strong marketing campaigns and continued solid execution of our health and sustainability activities. We were encouraged by the 19.2 growth in net consumer online sales at bol.com during the third quarter, which came on top of the almost 46% growth in the year ago period. The number of third-party sellers on the platform also continues to grow and now stands at 48,000. Albert Heijn completed the acquisition of 38 Dane stores in Q3. We expect all of these stores to be remodeled to the Albert Heijn fresh and technology-focused format by the mid of this November. And in Belgium, the Deleuze SuperPlus loyalty plan which provides extra rewards and discounts to consumers of healthy and sustainable products, continues to gain traction, providing a nice sales uplift. The program ended the third quarter with more than 2 million members in just one year since its inception. Moving on to slide eight, and we continue to make progress in elevating our healthy and sustainability strategy, and now discuss a few of those items. Bold.com, our online retail platform in the Benelux, has taken a step towards a sustainable ambition by utilizing new multi-packaging technology. And this makes Bold.com the first in the world to pack with multiple custom items in one box, which means we have a faster and more sustainable process and fewer delivery trips, and thereby reducing Bold.com's overall CO2 emissions and making us more cost-efficient at the same time. Following the success of its SuperPlus program, Deles has added a healthy membership program for companies, which provides discounts on healthy products with Nutri-Score A or B at Deles Belgium. And this allows us to introduce more healthier eating to these employees by providing special discounts, but also extended Deles reach to new customers who hadn't previously shopped our brand. And in September, our Albert brand was recognized as the leader in organic own-brand products by customers in the Czech Republic. And this is in turn strengthening Albert's proposition with customers, and it is driving market share gains at the brands at the same time. All in all, our continued efforts have been recognized by NSCI, which upgraded our 2021 ESG rating to a double A from our previous single A rating. We are proud of this achievement as MSCI is the most widely used ESG benchmark by our investors. And our progress here reflects our ambition to be an ESG leader, and we will continue to work hard toward this goal. Finishing on that very positive note, let me now hand over to Nathalie.

I'm also very proud to share another quarter of strong results. Ajo Deleuze teams around the world remain focused and disciplined, and our strong local brands, our scale, and our robust business model are providing plenty of resilience as we face heightened pressures from the macro environment, be it from rising COVID infections, inflation, or continued global logistics and supply chain disruption. Our third quarter was strong across the board. In particular, with our brands sustaining their positive sales momentum, net sales grew 4.6% at constant exchange rates to 18.5 billion euros. Group comparable sales, XGAS, increased 1.7%, building on the healthy group comp sales growth of 10.5% in the year-ago quarter. Importantly within that figure, Q3 net consumer online sales grew 29.2% at constant exchange rates, including over-proportionate growth in the U.S., as well as in Europe for both the food and the bowl businesses. Group underlying operating income increased by 0.7% at constant rates in the quarter to 812 million euros, with underlying operating margin down 20 basis points to 4.4% at constant rates. Put in the context, however, of last year's record results, we again clearly leveraged our strong, top-line, and save-for-our-customer initiatives to deliver a result that came in ahead of expectation. Underlying income from continuing operations grew by 4.1% to €547 million in the quarter, and we repurchased 7.7 million shares for €207 million. As a result, diluted underlying EPS, with 53 euro cents, up 8.1% at constant rates compared to last year. Slide 11 shows our results on an IFRS-reported basis for Q3 as well. Now, moving on to slide 12, let's take a closer look at our comp sales trends on a two-year stack basis in a little more detail. We posted a 15.3% and 7.3% two-year comp sales tax in the U.S. and Europe, respectively. On chart 13, you can see that after we adjust for the influences of weather and calendar, our sales trends are even stronger than those reported figures in both regions. So we have not just maintained, but clearly we've built on the momentum in 2020. This underlies not only the stickiness of new consumer behaviors, which Franz already mentioned, but also clearly demonstrates that our brands continue to execute very well in this fluid environment. From a regional perspective, we posted a 16.1% adjusted two-year comp sales stack in the U.S. in Q3, including adjustments for weather and calendar. This is an acceleration versus full-year 2020, as well as Q1 and Q2 stacks and two-year comp numbers that were 14.6% and 15.9% respectively. In Europe, the adjusted two-year comp stack in Q3 was 7.8% after adjusting for floods in Belgium and other weather and calendar shifts. While decelerating versus previous quarters, the Q3 adjusted two-year stack figure remains visibly above the pre-COVID growth rate due to market share gains for our Benelux brands as well as a rebound in several of the Central and Southeastern European countries, which were more challenged for much of the past year. Moving on to our third quarter performance, C-chart 14. Net sales in the U.S. grew 6.8% at constant rate to 11.5 billion euros. U.S. comp sales at gas were up 2.9% against a tough comp of 12.4%.

in the year-ago quarter.

It also should be noted that the Q3 comp sales were negatively impacted by 0.8 percentage points due to calendar shifts related to the timing of the 4th of July holiday. With respect to net consumer online sales, revenues grew 52.9% in constant currency, driven by increased click and collect capacity, as well as our fresh direct acquisition. Excluding FreshDirect, our U.S. online sales business grew at 26.2% in Q3, even as we lap triple-digit growth in the year-before period. The step change in the way many consumers shop, favoring the convenience of online purchases, is becoming more clear with each and every quarter that we trade through. Our unique and brand-specific omni-channel offering is having a positive and sustainable effect on our U.S. business. Our U.S. underlying operating margin in the U.S. was 4.8%, down 20 basis points from the prior year at constant exchange rates, as margin lapped record Q3 levels from 2020. Nonetheless, Q3 2021 U.S. underlying operating margin was very strong within the context of pre-COVID levels due to continued strong sales leverage. In Europe, net sales in the third quarter grew by 1.1%, to 7 billion euros, and comparable sales were stable versus the prior year. Sales benefited from market share gains at several of our brands, as well as further growth at Bull.com. It should be noted that Q3 Europe comparable sales were negatively impacted by approximately 40 basis points due to the floods in Belgium. Net consumer online sales in Europe grew 20.1% in Q3, on top of 48.6% growth in the same period of last year. At Boll.com, our online retail platform in the Benelux, net consumer online sales grew 19.2% in the quarter. This includes a 24.6% increase in third-party sales as we continue to expand our position as Benelux's leading online marketplace. Underlying operating margin in Europe was 4.3%, flat versus the prior year at constant exchange rates, as the strong execution of cost savings programs offsets rising cost pressures. Moving on to slide 15, free cash flow in the third quarter was 516 million euros, which compares to 176 million euros last year. This development was impacted by working capital improvements, lower taxes, and most importantly, higher operating cash flows. Now turning to our outlook for 2021 on chart 16. While recent trends with COVID-19 and a choppy macro environment continue to create significant uncertainty, the strength of our brands, our deep customer relationships, and excellence in execution have once again allowed us to over-deliver relative to our expectations in the quarter. As a result, we're raising our full year 2021 underlying operating margin, underlying EPS, and free cash flow outlook. We continue to expect the comp sales trajectory to be on a two-year basis in 2021, to be better on a two-year basis in 2021, compared to pre-COVID-19 levels. And while it doesn't affect our comp sales, our Q1 acquisition of FreshDirect, as well as stores from Southeastern Grocers, along with the Q3 acquisition of 38 stores from Dane Supermarkets, are providing us with additional incremental sales. We're raising our underlying operating margin outlook to approximately 4.4% versus the 4.3% we had previously, reflecting the strong year-to-date margin performance. This margin outlook continues to embed over 750 million euros of Save for Our Customer savings initiatives, which have offset cost pressures related to COVID-19, as well as the earnings dilution from increased online penetration. As a consequence of the higher margin, we are raising our full year 2021 underlying EPS outlook, which is now expected to grow by low to mid 20 percentage point rates versus 2019. This is up from our last guidance that was high team growth versus 2019. We're also increasing our free cash flow guidance to approximately 1.7 billion euros compared to prior guidance of 1.6 billion euros. The upgraded free cash flow guidance is driven by our increased underlying operating margin and underlying earnings forecast. The guidance includes our commitment to increase our annual investments in our digital and omni-channel capabilities, which are current and future growth drivers for this group and very important to us. Lastly, we're on track towards growing our 2021 full-year dividend predicated on a 40% to 50% payout ratio on underlying earnings. and we remain committed to our 1 billion euro share repurchases during 2021. As we get ready to close this year, we're proud of our accomplishments. Our business is in great shape. We're ready for the opportunities and challenges ahead. With that in mind, Frantz and I are looking forward to speaking to you more about our strategy, outlook, key initiatives across the brands and regions at our Investor Day this coming Monday. But for now, we're ready to take your questions related to the Q3 results. So operator, would you please open the line for our questions?

Thank you. Ladies and gentlemen, to be registered for the question and answer queue, please press star 1. To remove a question, please press star 2. 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. Andrew Gwynne, Exane, BNP. Please go ahead.

Yeah, good morning, team. Two questions, if I can. So, firstly, logistics. Obviously, we've seen quite a lot of inflation kicking around there. So, truly, where we're at, is it a significant challenge? And then also, particularly on BOL, are we seeing any potential availability challenges? And then the second question, I appreciate it's probably about five questions, but the second question, just thinking more generally, clearly another very strong period for trading on the two-year stack basis. Do you think those gains can hold into next year? I appreciate those market share gains. There's a bit of inflation there, but on the broader volume point, do you think you can hang on to much of that into 2022?

Thank you very much. Let me come back to your question on logistics and supply chain and then on market share later on. I think for our European markets, we see... a pretty normal supply chain at this moment. And we are very well prepared for the festive season, both in our food businesses as well as Bold.com with the marketplace and platform. So we feel confident that we have a robust and reliable season for our customers. In the Bold.com logistics scheme, it helps when customers are a little bit earlier buying their presents for their friends and family. But we are well prepared, and of course we are already working on that scheme, capacity, logistics, and working with our 48,000 vendors. We are working there robustly to prepare the season. On the U.S., we see a little bit more challenge supply chain in the U.S. in the total industry, and that is at the moment not easy. It has to do with the offer of labor, L&D costs, but also factories and manufacturers which were challenged by the labor factor. Our teams do an immense job to make the best possible for our consumers. But also there, talking about the festive season, we are well stocked for the special products and the delicatessen products. We also feel that in the U.S. we will have a robust festive offering for our customers to have a good celebration with their family and friends. On market share, I think we hopefully we have in the meantime made clear that we have a strong omnichannel positioning in our group, that our brands are well positioned with leading market shares in their markets, that COVID helped the trust factor and the reliability of our brands and the proximity of our brands, the local brands to their communities. That's why we're pretty confident that also going forward, we are well positioned to gain market shares. Okay, great. Look forward to talking to you on Monday. Yeah, looking forward to you too, Monday too.

And the next question is from Mr. Nick Coulter-Sitton. Please go ahead.

Hi, good morning. Thank you for taking my questions. Firstly, In the US, could you talk about the shelf-edge inflation in the quarter, your thoughts going forward, and whether the competitor sets are being rational in passing that through, or if there's any kind of differential activity? And then secondly, in Belgium, where I guess there's a little more promotional activity, could you talk about the trends you're seeing there and whether you expect that competitive activity to normalise? Thank you.

Yeah, there's a lot of talk about inflation at the moment, and we talked about it in the last quarters as well. We gave you the last quarters also the CPI data for the Northeast, which went up to 3% in the Q3, coming up from 2.6% in the Q1 and 0.1% in Q2. so yes there is inflation and we also think that there will be a little bit more inflation in the fourth quarter at the same time we have the task to manage this in the proper way with our negotiation with the national brands with our strength of our private label and own brands to make sure that for consumers there is the best for the best possible offer um

But that's all being passed through. There's no kind of, you're seeing an orderly market.

That's the second part of the answer, is that the markets are at the moment very irrational. So when price increases are legitimate, we think that we can pass them on, and that's exactly what we do. In Europe, the price inflations are lower than in the U.S. In Belgium, you talk about promotion levels. It's a rather flat inflation level. in the Netherlands is roughly 1, 1.5%. So still manageable, maybe a little bit more inflation in the fourth quarter. I think we know how to deal with these kinds of things. And I think for a customer, of course, every dollar is $1 more. So we negotiate hard. But I think it's a digestible inflation for consumers. And for us, we pass it on when it's illegitimate.

And in Belgium, it seems like that was a competitive market in the past couple of quarters or more competitive. Is that your sense?

Yeah, it's still very competitive in the Belgian market. That's why you also see inflation levels, which are roughly flat, which are slightly lower than the Dutch market and a bit lower than the US. So competitive markets. At the moment, we gain market share in Belgium. So I think we do the right things there.

Right. Thanks so much, Seth.

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

Hi. Thank you for taking the question. Just following on from that, I guess, if you could help us understand the gross margin dynamics in the quarter. It looks like they fell in the third quarter, having been up quite strongly for about six quarters. Actually, help us understand that. Thank you.

This is Natalie. I will talk about the gross margin. We're actually pretty impressed with our gross margin in the third quarter, that if you look at the development of that, what you see is it has been stable, particularly in the U.S., and that's something that shows the strength of our business as we've been going through those different dynamics in the period. I think what you see in the margin is that there have been different cost pieces coming into our margin. But on the gross margin side, we've had good, strong development that continued in the third quarter.

Okay. Am I reading it wrongly? It just looks like the development is below the second quarter by quite a bit, or am I just missing that?

If you look at it versus the prior year, I believe the number is still quite stable.

Got you. Okay. Thanks, Natalie. Appreciate it.

And the next question is from Sophia Lemonet, Bank of America. Please go ahead.

Yes, thank you for taking my question. Just one, actually. The question is, are you able to measure the loyalty in the U.S. and in the Netherlands with your customers, especially, you know, going to more normalization post-pandemic, just to understand a bit more what the average basket is doing, the footfall, whether the consumer is trading down or up in a kind of reopening world?

Xavier? You were a little bit faint in the background, volume-wise, but I think I got your question. You asked a little bit about loyalty, football, and baskets in the U.S. and in Europe. We see in Europe that we gained market shares, and also we're gaining still market shares in the Dutch market, both with the food brands, but also with wool, and the same for the less in Belgium. So that means that our offering is very competitive. And we see that if you look at the offerings that in our stores, we have all type of customers, all type of wallets, I think the right assortments. We stepped up quite a bit in the Dutch market, our price favorite assortment, which is the price entry assortment that's doing extremely well. So that's also a big boost for our price positioning. And that is helping baskets, that is helping loyalty. And we also introduced this Albert Heijn premium product, which is a subscription model. And also our loyalty products and our loyalty systems are doing very well. I think we are the most innovative from a digital perspective also in both the Dutch and the Belgian market. In the Belgian market, talking about loyalty, we connected now the Nutri-Score, which is this health navigation label together with discounts. So the healthier you buy, the more discounts you get. Two million members in the program already, which is a sensationally number and much better than before. So also they're talking about digital loyalty and people who shop our brands. I think we're doing very well. In the US, overall, amongst the food retailers, we gained share also in the third quarter. And also there you see our omnichannel presence. We grew our omnichannel sales again. We grow now faster with our click and collect services than with our delivery sales, which is not only margin accretive, but shows also how many customers are still coming to our stores to pick up their merchandise. So I think overall, we see a very positive response of customers to our increased loyalty systems in the US. We see that we get... that we are very consistent in our pricing and price perception and for stop-and-shop that is even improving. So I'm quite happy with the developments at the moment.

Okay, and just a quick follow-up. Have you seen potentially the consumer trading down or up in the recent weeks, I would say?

No, we have not seen that yet, but I think that's logical when, for example, COVID hits or we have a very different economic, macroeconomic outlook, that might change. But at the moment, we don't see this. I think people are preparing for the festive season. At the moment, we have a strong consumer in the U.S. on all levels of society, supported by governmental programs. We see strong consumer spending, strong consumer overall. And also in the Dutch market here, we see that with with the typology of customers, I think we see that also our baskets are getting stronger and our loyalty is getting better. And it has to do with a good assortment. Don't forget that we see now more working from home, so that is also supportive for supermarket sales. We see that more people have chosen to cook at home, discovery, again, of cooking themselves. And therefore, I think we have the right assortments for convenience and for fresh. And if you shop our Belgian, Dutch or South Eastern Europe or US stores, you see that we made a big step up during COVID in assortment of convenience, fresh and healthy. And I think that has its effect at the moment, combined with our omnichannel offering.

Thank you, that's very helpful.

And the next question is from Ms. Fabienne Caron, Kepler Chauffeur. Please go ahead.

Yes, so good morning, everyone. Two quick ones from my side. The first one, can you tell us how you deal with wage inflation in the U.S.? Do you see more pressure from your employees, the unions, or do you see higher turnover? And the second question would be on quick commerce. We've seen recently more and more food retailers making collaboration with Gorillaz, Flink, Cashew, and the others, but I don't think we've seen anything from your side, so it would be interesting to have your thoughts on it. Thank you.

You're taking the first, Natalie, and I take the second. Is that an idea?

That sounds good. I'll start with the question on wage pressure and everything that's happening on labor in the U.S. You know, it's definitely a hot topic for us in the U.S., and you see that it's particularly an issue on the supply chain side. But what I would say is if you look at this, what you see is I'll say the strongest places where we're feeling the crunch the most are when it comes to transportation, distribution, I think we're doing a great job of maintaining that in-store presence. We've had things where we went out and we needed to recruit. We told you earlier about getting 8,000 people in a day for Food Lion when we needed it. I think one of the fundamental differences for our industry versus others is a lot of people were laying people off during COVID. We were putting people in jobs. And so when we look at that piece, we're starting from a better position. There are wage pressures, and it's something we're very cognizant of across the board, whether it's Europe or the U.S. They don't seem to be, you know, outside of the range of normal inflation, but it is something where we're paying special attention to it, especially in some of those very critical positions for us as we go forward. On to the new collaborations, Ron.

Thanks for the question, Fabienne, and you know us already for a long time. So you have seen us over time being very early and innovative with all kinds of omnichannel type of formats and where we made big steps from next day delivery to same day click and collect and still have a very strong delivery business as well. We also mentioned, we also moved in a number of markets already to 30 minutes, one, two hours type of delivery. And of course, we also follow that instant delivery model, which we see in Europe, but also in the U.S., where it originated. We also follow that, of course, very closely. We check all those customer journeys and we see what is the best added value for customers. We try to size that market. We try to size which type of customers. We also look at the profitability, by the way, of those models or the lack of profitability So we follow those models very carefully, and we monitor the viability if we would add such a service to our portfolio, yes or no, and we are in that process now. So I think we are fully aware it's a relatively small market at the moment, but you see that the time element of our own omnichannel business has also got much more, let's say, much shorter in these times. So we follow this very closely, and we will make some steps there and then we'll let you know.

Okay, thank you.

And the next question is from Mr. James Gwisnick, Jefferies International. Please go ahead.

Yes, thank you. Morning, Fran. Just a quick question. Fran, you seem to become more comfortable that these changes in consumer behavior in the U.S. are becoming entrenched. from a couple of things that you said and also some of the things you're saying on the press release. Firstly, is that impression right? And if it is, why are you becoming more comfortable with that sustainability of the change in behavior?

I'm happy to hop in on that one for just a second because I do believe we feel very strongly that there is a change in consumer stickiness. that is really taken from our learnings during the pandemic. And I think on the one hand, what that means is that we've been able to, I think, capture some of those changes in behavior. So as people are eating, shopping, working more from home, what are the new opportunities for us with new food solutions, with new different products, different availability for our consumers? But it's also something where I think the way that our business is set up in the U.S., where we have high-density stores, a higher density of stores, where we have sometimes a smaller footprint than some of our peers, where we've really come in and been able to mean more to those consumers. So that's a place where I think on the one hand what you've seen is some changes in behavior that are positive for us, and that's people want to eat healthier, people are doing more at home, We're seeing all of those trends that really help to a strong food retail position. And then the second one is because of the service and then those structural issues in terms of how our stores are positioned. I think those are things that we have been able to capitalize on and expect to continue to do.

And just to add here, I think our private label offering also got better also we grew private label share which where we can differentiate ourselves if it's price points or offering or reformulation and the other thing and it sounds a little bit emotional but during COVID I think a lot of families and communities were challenged from a health perspective and I think there we also gained a lot of loyalty and trust from communities because we are so close to the community. We know those people very well. We employ a lot of people from the communities, but we also have a very strong relationship on keeping communities going. And I think we supported a lot of people in communities in these kind of very difficult times. If it's charity, if it's food donations, if it's food programs, if it's information and navigation to eat healthier and to change your lifestyle to your benefit. And I think that created a lot of extra connection with our great local brands, with those local communities. And that element of trust, I think, is also paying out now.

Thank you. Can I perhaps press you more on that point? I understand that there's clear a correlation between density of distribution and people moving around less helping you. I'm just wondering whether in recent months people, particularly mobility in the U.S., have not recovered. you feel more comfortable they'll continue to behave that way next year and beyond. That confidence has changed in recent months.

No, but I think that's what Natalie rightly said, the stickiness of change behavior. We see that everywhere. And the working from home, the healthier wishes on food, convenience meals, cooking at home. And let's not forget, I think a lot of people who were forced because of the out-of-home market was closed down. to prepare their meals at home, they learned a lot. But they also saw, wow, you can have a very healthy meal, conveniently cooked for a pretty low price compared to out of home. The out of home market in the US is much bigger than in Europe, the shares. So if the market bounces back, then there's also a bigger effect in the US for supermarket sales if people eat more from home than they used to do in the past, bigger effect than in Europe. And we think that those effects are sticky. And that combined with our omnichannel presence, so that you make it very easy and much easier if it's click and collect or a pick from store, all these kinds of different business formats. I think that whole proposition is fitting to what customers behaviorally are changing at the moment. And we think that that will stay for a big part. And I don't know where you work at the moment, but if you now work from home, then you take your breakfast and your lunch. And I think that working from home will also be a very sticky effect and not only in the US.

That's very clear. Thank you. Thank you, Franz.

And the next question is from Miss Maria Laura Adorno Morgan Stanley. Please go ahead.

Thank you very much for taking my question. Most of my questions have been answered. I was just wondering perhaps if you can remind us how many times a year you have negotiations with suppliers that are happening in Europe? So that would be the first part of my question. And the second part, maybe perhaps with respect to your European markets, if you can talk post-review, like what type of dynamics are you seeing from a price and promotion standpoint? Is it becoming more inflationary or are some of those markets still very much in deflationary? Thank you.

So, Nathalie, if you take the second one, then I will take the first one. The negotiation cycles with our suppliers. Classically, traditionally, and I'm a couple of years in business, then you have a two-year, twice-a-year cycle in the U.S., and you have the one-year cycle with the big annual negotiations in Europe. That's a little bit how it traditionally was organized. But I think those things are changing. We still have two times a year overall negotiations on the commercial plans in the U.S., and we still have those annual negotiations in Europe. But in the meantime, I think it got more fluid. And especially if you look at, of course, at the fresh categories, fruit and veg and produce and meat, that is a weekly or sometimes a daily affair. For the center store, it's more towards annual negotiations, but also there, of course, with the market positions we have, with the number one and two positions we have, we are, if necessary, we're every month or every week with our vendors to see to interpret raw material prices, packaging and plastics and these kind of things to see that we get the right and the best possible cost of goods. So it got more fluid, but traditionally we had one times a year in Europe and twice a year in the U.S.

And on your question about pricing and promotion in Europe, what I'd like to say on that one is just that You know, we are in a period where Europe has become a lot more stabilized post-COVID than what we've seen in the U.S. So you are seeing, I'll say, pricing more at normalized levels. Happily, the inflation levels have been lower here than they've been in the U.S. So that's a place where we've been able to really shield our consumers from price increases in the last quarter. But it also is still... I'll say higher promotions than where we saw previously this year, but still significantly below, or I'll say below what we'd seen pre-COVID. It is something that's more normalizing. Expect the European markets to be something where I think there is a higher price sensitivity at the moment because there's just a lot less stimulus in these markets than what we're seeing in the U.S. But it is something where in terms of pricing, it's, you know, I think been a very rational environment here as it has been in the U.S.

And the next question is from Mr. Andrew Porches, HSBC. Please go ahead. Yeah.

Hi, guys. A couple from me. Just in terms of the operating outlook that you published today, can you just give us an idea on what you're expecting in terms of sales trends through Q4 and, you know, what you're seeing Q4 to date, if that's possible? And then second question, I guess, just more on the competitive environment in the U.S. I mean, you know, during times of sort of inflation, supply chain volatility, et cetera, you normally see I guess the gaps between winners and losers open up a bit. Is your outperformance versus the market accelerating? Are you starting to see different metrics in terms of availability versus competitors and things like that improve? Perhaps give us some color around that.

Maybe I will start on that one, which is how are we seeing things in terms of the sales outlook? Well, you know we don't give you that one in terms of on a forward-looking basis. What I can say is When we look at the third quarter, we did see, you know, inflation starting to take a little bit at the end of the quarter. So in terms of sales growth over the quarter, we had a little bit of a sequential improvement. And when we look at the outlook or what we've seen, I'll say, in the beginning of this period, those trends have continued. So, you know, there's a lot of fluidity in the market when we look at things of COVID between now and the end of the year, but we're very pleased with the development. And I think in terms of the outperformance versus the U.S. competitors, that comment, I think what we were talking about there was really on the supply chain and being able to get those products. That's something where we've been, I think, very diligent. You know that we're in the process of bringing in our supply chain. We've gone from, you know, this year, Franz mentioned it in his prepared comments, that, you know, we now have, 65% where it's all in our own control. We're very active. That means we're much better able to control availability, have the conversations with CPG companies ourselves than we were a year ago. And I think the other piece that's very important is, you know, we are a company that is great with processes. We're super operators and we plan ahead. And so we knew that there was going to be issues this year around holiday and making sure we were in a good position. So that's a place that we have prepared for. And we have, you know, we think we're in a strong position to make sure all of those holiday essentials are ready as we come into the fourth quarter. And that's something that I think may differentiate us from some of our competitors.

And the next question is coming from Mr. Fernand de Boer, de Groot-Veterkamp. Please go ahead.

Yes, good morning. It's Fernand de Boer, de Groot-Veterkamp, and also a couple of me. Going back maybe on the previous question, if you look at your fourth quarter 2019 EPS, and if you look now at your guidance, how conservative are you in that guide? Because I look at 52 cents in 2004, or 4Q in 2019. That's the first question. And to come back on the stickiness of this COVID sales, in the pressure leaves, you said, okay, you're continuing to make investments to address that trend. Is there anything what you are going to do differently going forward in that respect? Because that's a little bit my conclusion from that comment. And where do you expect them to step up your investments? So and then the last question on that pricing and difference in inflation Europe versus the U.S. And the comment is you say two-time cycle in the U.S. and one-time cycle in Europe. Is that also one of the reasons what explains this difference in food inflation that most likely we could expect more inflation next year in Europe and maybe a little bit less in the U.S. Those are my questions. Thank you.

So let me start with your EPS question and then I'll pass over to Franz. This is one that the real answer on Q4 is just that last year we had a 53-week year and this year we've got a 52-week year. So if you take that 53-week impact, its sales were up by 1.2 billion, 7%. The UOP margin was enhanced by 20 basis points, and our EPS actually had a 6% positive impact as a result of that. So if you look at our numbers on a comparable 52-week basis, I think that's probably where you were going. I was just going to say, if you look at that, our guidance implies that we're going to have at least mid-single-digit EPS growth on a like-for-like basis, and I can confirm that.

Compared to 2009, 4Q 2020.

No, I'm sorry. That's compared to 2020.

yeah okay so on the on the uh for now on the um on the question on stickiness and change of behavior of customers how well are we prepared what have we done on these kind of things to address that that opportunity and of course we all know that that opportunity came through coverage which is not which is in sad reason to talk about an opportunity but Customer behavior changed quite dramatically, I think, and it will stick. We see this with working from home. You see this with how you work with your virtual tools. We see our consumption from home going up. We see an increased online demand. And those are all areas, I think, we very well understood. We are already a company with high fresh convenience and a level of health, 51% of our total on-brand sales is healthy. So we have a very good starting position, high credibility with consumers to be active in this space. And we stepped up dramatically. If you look now at the Albert Heijn and Deleuze assortments, we stepped up dramatically in ready meals, ready to cook, ready to eat, and ready to eat. We stepped up dramatically in products which are healthier and better reformulated. We did a lot of work in the last couple of years. But also in the U.S., if you now go into the remodeled stop-and-shop stores, you see more ready-made meals, you see more delicatessen, you see more kitchen, you see more convenience. And also the American consumer, they eat more from home, and not only the breakfast and the lunch because of working from home. So we see those trends. We invested in... our kitchen our own meal kitchen for example where we prepare those meals and we on rhode island we invested in the assortments we invested also in food line with a big step up in uh in in kitchen delicatessen and delhi at the delhi departments just to service all these kind of requirements and we see that that is happening we see that we can sell those products well we invested in those products but those are normally products with a good margin profile so um I think we are ready for that move, and not only store-wise, but also omni-channel-wise with our online services. So you saw our online numbers growing up. We indicated already 70% growth in this year in the U.S. online, and we're going to make that number. I think we have much more to tell about this topic when you can find some time coming Monday to be with us in our investor day. And then I think we will get a lot of pretty cool information how we would like to see that we use this trend and that we are ahead of the game and that we have a very competitive offer.

Okay, and the last question on the difference in the US-Europe cycle impact on inflation.

In fact, on inflation, because we said already the inflation levels in the U.S. and in Europe, the difference in how we explain that, we already gave you some information there. We also said that both in the U.S. and Europe, we see a little bit more higher inflation in the fourth quarter, but it still will be digestible and relatively moderate, and we manage this very carefully with our economists, with our shoot cost models. So I think we are on top of it, and it's manageable for us at the moment. And it's our interest, of course, to keep those prices as low as possible for our consumers.

Okay. Thank you very much.

There are no further questions. Thank you, operator. So that completes our call for today. As Ryan just said, we're looking forward to seeing you all on Monday. If there's any other follow-up questions, the IR team is, of course, available for taking any questions throughout the remainder of the day and we'll see you on Monday.