Koninklijke Ad N.V. S/Adr

Ladies and gentlemen, good morning and welcome to the analyst conference call on the third quarter 2025 results of Aho Delhaes. Please note this call is being webcast and recorded. During this call, Aho Delhaes anticipates making projections and forward-looking statements. All statements other than statements of historical facts may be forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and that may cause our actual results to differ materially from future results expressed or implied by such forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of our Delhares. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, JP.

Thank you very much, Sharon, and I'm delighted to welcome you all today to our Q3 2025 results from Sunny Zendan. On today's call are Franz Muller, our President and CEO. and Yolanda Putzile, 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 aholdales.com, which also provides extra disclosures and details for your convenience. To ensure everyone's opportunity to ask their questions today, I ask you to limit yourselves to two questions. If you have further questions, then feel free to re-enter the queue. To cure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated. And with that, it's over to you, Frank.

Thank you, JP, and good morning to all of you indeed from a sunny Zandam. As you will have seen in our interim release this morning, our 2025 year-to-date performance is a great proof of the potential and value creation we are excited about with our growing together strategy. From a macro, social and political perspective, there is a lot going on in the world, the effects of which are felt in our stores every day in real time. With rising inflation, stagnating economic growth and changes in government policy, which in some cases are becoming more frequent and more unpredictable, the business and customer climate is for sure volatile. Whether it is the current delay to the distribution of SNAP benefits, and rising health and medical costs in the US, timing of the food stamp payments scheduled in Romania, the recent limitations on the grocery trade market implemented by the government in Serbia, this creates uncertainty, tough choices and headwinds for consumers and businesses alike. At the same time, the industry is evolving, be it omnichannel, data, AI, and mechanization. Those companies, and I would include Al DeLess in that group, who are at the forefront of these changes, who are well prepared, well invested, and can leverage the experience and creativity of their people, those companies will outperform. Therefore, to ensure we continue to sail successfully in this dynamic, I believe three things are essential to keep the rudder steady. Flexibility, resilience, and culture. These qualities become truly powerful when they are aligned behind a focused and well-articulated plan, which is exactly what our Growing Together strategy provides. It connects how we serve customers, run our operations, invest in our people, and deliver strong financial performance, all while advancing our commitment to health, sustainability, and responsible growth. So let me share a few examples how this tangibly shows up across our business in how we innovate for customers, build trust through transparency, and act responsibly in our communities. The flexibility comes to life through our work in our own brands, where we adapt quickly to evolving customer needs and local market dynamics. And by harmonizing assortments, accelerating innovation, and aligning product development across our regions, our teams can respond faster and with greater position to what customers want compared to competition. This agility helps us deliver differentiated value and quality while simplifying operations and improving profitability. All of our brands have seen year-over-year growth in own-brand penetration, and in both regions we are seeing own-brand sales growth outpaced ever the rest of the store in both dollars or euros or units. But this is not the time to sit back and relax, and therefore we are stepping up our own brand game and have undertaken a comprehensive cross-functional and cross-regional view to identify further opportunities. We will lean into this more heavily as we move through the next seasons. We have the biggest own brand share of store growth opportunity in the U.S. Some of the foundational work put in place to sustain momentum in 2026 and beyond includes, for example, the review of our 90% of our categories to harmonize assortments, align product specs, and reduce supply complexity. The identification of a pipeline for new products in high growth categories. and the activation of commercial plans across the brands to raise own brand awareness and drive higher consistency and efficiency in execution. In Europe, we are building on a very strong position with own brand share already around 50-50%. Therefore, we are concentrating on further strengthening competitiveness through continued assortment harmonization of our health-oriented brands, like Nature's Promise and Terra, and the expansion of our everyday low-priced products, or how we call them, price favorites. All our European brands now have a minimum of 900 price favorite products across their assortments. Through our family of great local brands, we have unparalleled proximity and rich, anonymized data through loyalty programs that gives us a real-time understanding of what matters most to our customers. And during challenging times, it's important that our customers do not have to choose between eating a healthy and nutritious meal and paying their rent. This mindset keeps our people motivated and connected to our purpose. Resilience for our customers comes from transparency, being open and consistent about the value, quality and health choices we provide. We strengthen trust by clearly communicating nutritional information, offering price certainty, and helping customers to be informed, affordable and healthy decisions. Here, visibility and education are equally important. Customers increasingly value the healthy options accessible across our brands. They also appreciate the simplicity of easily identifying the health differences between comparable products. such as with the guiding stars in the U.S. and NutriScores in Europe, new visual rating systems used for our own brand products. In the U.S., we are partnering with Cercana to expand the accessibility of the system to a broader range of suppliers. Albert Heijn in the Netherlands is revamping its fresh product aisle, expanding its offering with more convenience, new snacks and ready-made meal kits. It's also introducing new fresh products new fresh food packages to inspire customers to prepare fresh and nutritious meals more quickly and easily. Maxi Serbia held its third healthy food everyday school program to encourage healthy eating amongst children. And in the program, students across Serbia learn about the importance of a balanced diet, eating fruit and vegetables, and physical activity. And finally, our culture is reflected in how we show up for our communities. Those partnerships with organizations such as the Global Food Banking Network and local initiatives like Food Lion Feeds and Hannaford School Pantries, we help families access nutritious food and reduce waste across our value chain. It has been just over a year since I, all the less, partnered with the Global Food Banking Network. And since then, we have provided the equivalent of 2.9 million meals to those in need. Hannaford is 200th school-based food pantry for students in need, and they launched that recently. And through partnership with school districts, food banks, and hunger relief organizations, the program has helped expand food access for students from preschool through college. As part of its annual Great Pantry Makeover initiatives, the Food Lion Feed Program we stocked 33 food pantries to better serve neighbors experiencing food insecurity. More than 92,000 pounds of food items were donated, and associates contributed more than 1,500 volunteer hours. And don't forget, by 2032, FoodLine has committed to donate 3 billion of cumulative meals. Albert Heijn held their annual You Can't Learn on Empty Stomach campaign, where customers could buy healthy breakfast or dinner products at a discount and donate them to the Dutch food banks. And through the campaign, more than 350,000 products were donated. These efforts are not side projects. They are part of who we are. They demonstrate that our culture of care and connection extends well beyond our stores and that we define success by the positive impact we create. Delivering for our customer communities today sets the standard for how we build the business for tomorrow. We are translating the same flexibility, resilience, and culture into our physical network, supply chain infrastructure, and technology investments. Expanding and densifying its growth markets modernizing logistics, and embedding AI-driven innovation that will enhance both customer experience and productivity. Our U.S. brands are solidifying their real estate pipelines to accelerate new store openings in the coming years. We see the strongest opportunity for growth in the markets served by our Food Lion brand. In some of our markets, like Raleigh and Charlotte, we have seen population growth of 7% to 8%. in the past five years, and that is not slowing. Having achieved its 52nd consecutive quarter of sales growth, Food Lion is well positioned to extend its record performance. Today, Food Lion is launching their omnichannel remodels at 153 stores in the Charlotte market. These remodels enhance the omnichannel shopping experience and include items like updated assortments and easy meal solutions, that they're ready to cook, or heat, or eat, and of course, are priced right. Self-checkouts for an enhanced and efficient shopping experience, and e-commerce options for all customers through Food Lion To Go, or a store pickup. This is now the third market to complete the omnichannel remodels, where we have previously launched remodels in Raleigh and Wilmington, we continue to see strong sales performance with average weekly sales outpacing non-remodeled stores. Construction is therefore also underway on 92 store remodels in the Greensboro market, which will be launched in 2026. In Europe, Deles Belgium is expanding its footprint with another eight new supermarkets that will open in 2026 under the brand's affiliate model. The new stores complement Deleuze's existing network and reinforce our growth ambitions in Belgium. Additionally, we expect the Delfood transaction, which are the former Louis Deleuze stores, to close in the first quarter of 2026, allowing Deleuze to further differentiate itself in the convenience store segment. We also continue to make good progress on the integration of Profi, where we see a strong future growth path. Over the past three years, the brand has opened over 200 stores and intends to ramp up expansion in the next three years. A few of the things we have done this year to set ourselves up for future success include things like introducing our own brand assortment to Profi customers, enhancing value and differentiation. Expanding Profi's strong quick meal service offerings of coffee, fresh pastries and convenient meals and those options also to our make-image and our shop-and-go stores and to meet, therefore, evolving customer needs. And we slowed our cadence of store openings to finalize the commitments we made to the competition authority. At the same time, our Romanian teams have used the time to identify optimal locations for each of our local brands to ensure we leverage their unique strength and create a better fit to local market dynamics. And you will see accelerated growth in 2026 on this front. With our customer value proposition advancing and our footprint ambitions taking shape, let me spend a few minutes on where we are on strengthening capabilities that will support the next phase of growth. The same flexibility, resilience, and culture that guide our brands also drive how we invest in infrastructure, automation, technology, and data. These enablers make us more efficient, deepen our customer relationship, and ensure we use our data to create a faster and more connected business. So here are a few examples to illustrate this. To facilitate growing capacity demands, two weeks ago we announced plans for Al DeLess USA to build a new state-of-the-art distribution center in Burlington, North Carolina. The new facility, which will add over 1 million square feet of distribution center space, is expected to begin operations in 2029. To maximize efficiency, the site will leverage proven supply chain mechanization technology. And this investment is within the scope and parameters of the growing together financial network. Our culture of innovation is also providing new and powerful ways to interact and serve our customers as we will explore use cases for new technologies and business process improvement. With the rapid developments in AI, we see many opportunities to accelerate across selected domains of our business, focusing on the ones that can have a real impact on our business. And I'm confident that under the leadership of our new CTO, Jan Brecht, we will make fast progress building the right foundational AI platforms that will enable effective future scaling of winning AI solutions. Our teams will scale our proprietary retail media platform edge to our US brands in the coming year. This is an important step as retail media becomes an increasing effective way to create a relevant customer experience and to provide additional revenue streams. The platform powers on-site display, sponsored search and in-store digital screens and has already proven successful at several of our European brands. As 2025 draws to a close, I'm proud of our progress and more importantly, that we have sustained and strengthened brand equity and leading market positions across the portfolio. I'm confident we are doing the right things to reinforce our strategic levers to capture growth, volume, and market share. And at the same time, We are staying close to our customers and associates, working hard to navigate these turbulent times together successfully. As we turn our attention to delivering a strong holiday experience for our customers, prioritizing value, healthy assortments, convenience, and everything they need to create their own special and unique holiday moments, I also wish you happy holidays, starting with Thanksgiving in only a couple of weeks. Now over to Yolanda to talk more about the specifics of our third quarter and provide more color on our outlook.