Koninklijke Ad N.V. S/Adr

Ladies and gentlemen, good morning and welcome to the analyst conference call on the fourth quarter and full year 2025 results of Ajo del Jez. Please note that this call is being webcast and recorded. During this call, Ajo del Jez 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 and uncertainties, 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 Dalhairs. 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, Sharon, and good morning, everybody. I'm delighted to welcome you today to our Q4 and full year 2025 results conference call. On today's call are Franz Muller, our President and CEO, and Yolanda Putz-Pyle, 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, aholdeles.com. There we provide extra disclosures and details for your convenience. To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to two questions. If you have further questions, then feel free to re-enter the queue. To ensure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated. So, with that, Franz, over to you.

Yes. Thank you very much, JP, and good morning, everyone. In 2025, we operated in a rapidly shifting environment. Frequent and unpredictable government policies, pockets of inflation and volatility, and rapid advances in AI and technology. In that context, being a consistent and trusted partner for customers, associates, and all other stakeholders matters more than ever. As you will have seen in our release this morning, I'm proud to say we are delivering on our growing together commitments and are well positioned for what lies ahead. Our execution through the holiday season is a great example of how our growth model is coming together. allowing us to finish the year on high. And for the full year, net sales increased 5.9%, while comparable sales excluding gas increased 3.2%. We delivered unhealthy underlying operating margin of 4%, diluted underlying EPS growth of 7.8%, as well as strong free cash flow, allowing us to increase shareholder returns. In grocery, Success is never driven by only one thing. It's a result of many details coming together and that on an everyday space. As our capabilities mature and integrate, our execution in turn is becoming more connected. The backbone of this is that the flexibility we have created in our ecosystem to deploy scaled and yet tailored solutions. The resilience of our local value propositions and brand personalities, and a disciplined execution driven by aligned teams with a strong culture of ownership and accountability that underpins the growing together strategy. So let me unpack this a little bit more in detail with some practical examples. First, starting with the customer, let's talk about strengthening customer value through trusted products. Across our markets, our local brands invested in price and value by lowering prices and broadening own brand assortments in key daily needs. In the US, we had our first full year investing towards a total of $1 billion in price investments over those four years. And at the same time, we strengthened our own brand assortments, adding 1,100 new products in the US and 1,450 in Europe. In Europe, where own brand penetration is close to 50%, our assortments are a clear competitive advantage. Over the past year, we expanded collaboration through our AMS Buying Alliance, and this delivered quality improvements while also generating cost savings with a further expansion planned into 2026. These efforts are truly resonating with customers. Own brand growth continued to outperform the rest of the store with group level penetration reaching 39.8%, reflecting strong appreciation for quality, health, value, and innovation. The next core block is vibrant customer's experience, covering every interaction between our brands and customers in stores, online, and through services. Customers increasingly expect convenience, personalization, and a seamless integration across channels. In the U.S., we completed the rollout of Prism, creating a unified digital backbone for personalization at scale as it enhances opportunities in advertising and retail media. This enabled us to reach around 32 million customers and deliver 14 billion personalized offers in 2025. Customers are also responding positively to our shift forward towards the same day delivery and partnerships with DoorDash and Instacart, with additional partnerships planned. Together, these initiatives strengthen relevance, convenience, and loyalty across channels. In addition, in 2025, we opened 220 new stores and remodeled more than 450 locations, maintaining a modern, healthy and attractive store fleet. As a result, we have strengthened our number one or two positions in most of the markets where we operate. Another factor which is unlocking compounding opportunities for us is driving customer and business innovation, where digital, data and AI are increasingly powering both customer value and performance. Technology and AI represent a growing share of our €2.7 billion in annual capex. We are applying these capabilities across our ecosystem, improving availability and forecasting, enabling AI-assisted customer journeys, and scaling predictive and visual intelligence solutions. These investments, combined with our focus on local, store-first fulfillment and a more asset-light operating model, are yielding good results. Online sales grew 12.9%, led by 22.8% growth in the U.S. Food Lion had a standout quarter with over 35% e-commerce growth and a 2% point increase in penetrations. With the recent closure of six e-commerce fulfillment facilities, we have now completed the shift to our store-first operating model. In the Netherlands, the Albert Heijn app plays an essential role in daily lives for millions of consumers. Supported by generative AI, the app is becoming more personalized, multilingual, and intuitive. making it easier for customers to plan meals, manage rewards, and discover inspiration and new recipes. At Bol, we continue to innovate across the end-to-end journey. AI-powered features such as Gift Finder and Spot and Shop are increasing engagement and reach. by combining rich shopper insights with impactful campaigns bull was named the number one retail media publisher for the second year in a row in the netherlands retail media as you know is an increasingly important growth machine machine for the company the key strength is our ability to build once and scale across brands with one global retail media platform we can deploy new solutions quickly across markets while tailoring execution locally. So with strong capabilities in place, growth now is more about culture rather than capability, which you can see in our people positions. Good examples here are Margaret's move from Bol to Albert Heijn, or Keith brought a remit in the US as a chief commercial and digital officer. Both Margaret and Keith bring deep retail media and technology expertise into grocery. Also understanding the importance of developing best-in-class digital offerings and boosting capabilities across the commercial value chain through the power of AI. This reflects our belief that a win at one brand is a win for all brands and that scaling talent and capabilities is just as important as scaling technology. So let me now turn to shaping our portfolio to drive growth and excellence, where discipline, portfolio decisions, and operational execution work hand in hand. In Europe, we welcomed Profi at the beginning of 2025, establishing a strong platform in Romania for future growth. Throughout last year, Profi opened 17 new stores, marking the start of a promising growth trajectory. At Albert Heijn, we opened 19 new stores and launched a major refresh of the fresh square concept in more than 500 locations, responding to growing demand for convenient, nutritious food solutions. In Belgium, we now recently completed the acquisition of Louis Deleuze, adding 303 stores and expanding our presence in convenience in 2026. As the largest food retail group on the US eastern seaboard, we see meaningful runway in a still fragmented market. In a region where supermarket volumes declined in 2025, we delivered positive volumes by leading into price, home brands, and omnichannel convenience. In the US, Food Lion launched 153 remodels and started construction on 93 remodels in the Greensboro market. which will be launched later this year. Stop and Shop remodeled over 30 stores, deploying an efficient use of capital, progressing on their revitalization plan. As part of this plan, Stop and Shop improved store standards, service, and value perception. Price investments now cover more than 65% of the fleet, supported by stronger own brands, new marketing and in-store signage, upgraded stores, and improved execution. Through the combination of these efforts, we have seen steadily improving trends in comparable sales growth, including volume growth, by the way, and in our Net Promoter Score, or NPS. Especially encouraging are the year-to-date improvements in value for money and ease of shopping, showing the holistic nature of Roger and his team revitalization efforts. Finally, let me spend a moment on healthy communities and planet because we believe the everyday choices we all make do matter. As a family of great local brands, we are ambitious about the measurable impact we can have, striving to make healthy options more accessible and affordable, supporting the natural systems that make food possible, and reducing waste across our value chain. An important part of this, something we don't often talk about, is our U.S. pharmacy business, which plays a growing role in customer trust, health access, and loyalty. Millions of customers use our pharmacy services, placing them amongst our most engaged shoppers, with the majority of them being primary customers. With ongoing drugstore closures, our pharmacies also provide an important access point for health services in their local communities. Under the Inflation Reduction Act, Medicare prices will come down for 10 high-cost drugs. From a financial perspective, Yolanda will share additional figures as part of the 2026 outlook, which for all intents and purposes is a technical change for us. More importantly, for many customers, this provides meaningful financial relief, potentially freeing up spending for other everyday needs. As we leave 2025 behind, we can be proud of the progress achieved and the strong foundation built in the first year of growing together. Our strategy has been pressure tested, our capabilities are evolving, and our teams are operating in strong rhythm, which is delivering compounding results. We are carrying this momentum into 2026 with confidence in our execution, our portfolio, and our ability to continue to create value for customers, associates, communities, and, of course, shareholders. With that, I will now hand over to Jolanda for more detail on our financial performance and outlook.

Well, thank you, Frans, and good morning to everyone. Our performance underlines the resilience and flexibility of our brands to deliver, also in dynamic market conditions. It's a good reflection of how we're balancing our growth, investments, and cost-saving strategies in the US and in Europe, whilst remaining laser-focused on creating the best customer value proposition for every wallet. Our growth model is built on a simple and repeatable cycle. That cycle is anchored in the strength of our local brands. our leading omnichannel capabilities, and the customer value proposition that resonates. By combining sales-led growth with disciplined cost control and thoughtful capital allocation, we can invest in price, convenience, and digital while maintaining strong fee cash flows and returns. So let's dive deeper into the numbers. Net sales grew 6.1% to 23.5 billion euro in Q4. and 5.9% to 92.4 billion euro for the full year, driven by strong comparable sales, both in the US and in Europe, portfolio expansion, including Profi, and continued growth in Omnichannel. Q4 comparable sales were 2.5%, which includes a negative impact of 0.1 percentage points from weather and calendar shifts, and a negative impact of 0.2 percentage points from the end of tobacco sales in Belgium. Online sales grew 12.9% in Q4 and 13.3% for the full year, reflecting strong momentum in online grocery across both regions. Underlying operating margin was 4.2% in Q4 and 4% for the full year. Strong U.S. performance, more than offset, had wins from Serbia pricing regulation and first-time integration of Profic. Diluted underlying earnings per share was 73 cents in Q4, up 11.9%, and €2.67 for the full year. Q4 IFRS operating income was €899 million, corresponding to a 3.8% margin. IFRS results were 96 million Euro lower than underlying, mainly due to the impairment charges related to the strategic shift to a local store-first omnichannel fulfillment model in the US. For the full year, IFRS operating income was 3.5 billion Euro, representing a 3.8% margin. The 192 million euro difference versus underlying was largely driven by portfolio optimization actions, including the shift to a store-first model in the US and the acquisition and integration costs related to Profi. These actions reflect disciplined portfolio management aligned with our strategy. Operational excellence remains a core enabler of our growing together strategy. Through our family of great local brands, We leverage skill to combine sourcing power and skilled tech to deliver local impact in a simpler, smarter, and more seamless manner, unlocking new efficiencies through automation and innovation. In 2025, we delivered nearly €1.3 billion in SAFE for our customer savings, in line with our ambition for the year. These savings are reinvested with discipline into price, technology, store upgrades, and sustainability initiatives, increasing value for customers, creating free cash flow and returns. This also includes investments in growing complementary income streams, such as enhanced personalization and support services for brand partners, creating a capital-light revenue stream. With double-digit growth in 2025, we are making good progress towards complementary income of around €3 billion by 2028. Let's now take a closer look at our regional performance. On slide 21, for your convenience, we present the impacts of weather and calendar over the last quarters by region. U.S. net sales were at 13 billion euro. Comparable sales, excluding gas, increased 2.7%, driven by continued growth in online and pharmacy sales. The cycling of Hurricane Helene had a negative impact of approximately 20 base points. Online sales growth reached an excellent 22.8% for Q4 versus last year, driven by strong performance across all our brands. The combination of our delivery speed, customer reach, and extensive assortment enabled by our strategic shift to same-day delivery and ongoing partnerships with DoorDash and Instacart is what wins over customers. Underlying operating margin in the U.S. was 4.7%, The margin outperformance was driven by higher sales leverage, improvements to our online margins, the positive impact from a shift in category mix and lower shrink levels, which more than offset price investments and the dilutive impact from ongoing growth in pharmacy sales. Last October, we announced plans to develop a state-of-the-art DC in North Carolina. This investment adds capacity and automation in a key growth region. It improves efficiency and service levels and supports the long-term needs of our local brands, including Food Lion. And as you all know, Food Lion has been on an impressive trajectory of growth with Q4 marking the 53rd consecutive quarter of growth. In Europe, Q4 trends were in line with the prior quarter. Net sales were 10.5 billion, up 11.2%, partly due to the Profi acquisition, An increase in comparable sales of 2.4% and new store openings. Comparable sales had a negative impact of 50 base points from the cessation of tobacco sales in Belgium and calendar shifts. In Q4, online sales increased by 6.6%, driven by double digit growth at Albert Heijn. The strength of our European brands, their ability to adapt in complex conditions, and their relentless focus on cost savings allowed us to deliver an underlying operating margin of 4.1%. This was slightly better than anticipated, considering the headwinds from the sudden government decree and intervention on the limitation of prices in Serbia. Some of the brand highlights in the quarter include Albert Heijn reaching a record market share of 38.2% for the year, Delhaize Belgium completing its transformation and expanding in convenience, and the CSE brands, particularly Romania, demonstrating resilience and readiness for renewed growth. At Ball, Q4 capped a strong year with high single-digit growth, record Black Friday sales, and 70 base points of market share gains, as the brand successfully countered increased competition from Amazon and Chinese players. Full year underlying EBITDA increased to 207 million euro driven by advertising growth and cost discipline. Moving now to cash flow. Free cash flow was 1.5 billion euro in Q4 and 2.6 billion euro for the full year. This exceeded our guidance for the year and is in part a reflection of the strong holiday period and solid Q4 performance. Additionally, our gross gap expense was lower than our original guidance for the year due to the timing of new store openings as well as the finalization of our project plans around the construction of the new food line distribution center. Given the overall performance, I'm pleased to announce our proposal to increase the dividend for 2025 by 6% to €1.24 per share. This reflects our stated ambition to sustainably grow dividend per share and generate strong shareholder returns. To that end, we also initiated a 1 billion euro share buyback program for 2026 earlier this year. Finally, let me add some insights to Frans' comments on our healthy community and planet priorities. Through our trusted products, we are making healthier and more sustainable choices easier and more affordable. We do this by improving nutritional value, increasing transparency, and using data and insights to guide customer choices. In 2025, the percentage of own brand healthy food sales was 52.1%. Like for like, we improved with 40 base points compared to 2024, as our CSE region implemented the Nutri-Score methodology changes in 2025. Our total tons of food waste per food sales decreased 39.1% versus the 2016 baseline. This is a 4.4 percentage point improvement versus 2024, given by smart sourcing, better inventory management, and more donations. CO2 emissions in our own operations decreased 39.1% versus our 2018 baseline. which is an improvement of 3.4% versus last year, mainly driven by the installation of more sustainable refrigeration systems. Virgin plastic in our own brand packaging decreased 10.9% versus 2021, which is an improvement of 0.8 percentage point versus last year. As our brands were able to increase the percentage of recycled content in our own brand product packaging, This progress reflects a true company-wide effort and something that deeply matters to our people. It is embedded in how we operate and is why healthy communities and planet remains a key priority for us. Now turning to our guidance for 2026. First, a few specific items to reflect in your 2026 models. The Inflation Reduction Act will reduce U.S. pharmacy sales by approximately $350 million. with no impact on underlying profit. The Delfood acquisition is adding over 200 million in European sales. And 2026 includes a 53rd week, which is expected to add 1.5 to 2% to net sales and 2 to 3% to underlying net income from continuing operations, with no significant impact on operating margin. Our outlook reflects a disciplined approach to maximizing returns while maintaining flexibility. We expect an underlying operating margin of around 4%, with limited downside expected given our strong operating momentum and the good start of the year. Mid to high single-digit EPS growth at constant rates, a free cash flow of at least 2.3 billion euro, and a gross capex of approximately 2.7 billion euro. While we do not provide quarterly guidance, some phasing effects should be expected during the year as we flow investments in line with real-time trading conditions, allowing us to stay sharp, calibrate actions iteratively as new learnings emerge, and remain flexible to market developments, including macroeconomic and geopolitical uncertainties, such as Serbia. For 2026, you can therefore expect a persistent focus on value for customers, continued growth of our brands, disciplined investment in stores, logistics, and digital, and a relentless focus on cost and cash flow. This is how we operate, consistent, disciplined, and delivering compounding results. And with that, I will hand back to Frans for closing remarks.

Thank you very much, Yolanda. As you have heard and as you have seen, our growing together strategy is now fully in motion. The focus ahead is simple, doing more, even better. We have spoken today about many of our capabilities, but in an industry like ours, one of the most powerful and often underestimated is thriving people being connected to their communities. The partnerships between our brands and the communities they serve is as important an asset as scale or technology or algorithms. This proximity to our customers, listening carefully, learning continuously, and adapting quickly to what matters most in their daily lives is therefore the real oil that makes the ecosystem run smoothly. Therefore, also a big compliment to our teams for a remarkable result in 2025. Behind that, everything we do is within the framework of a clear operating reality. We remain laser focused on cost, disciplined in how we allocate capital, and deliberate in sequencing investments so that growth is funded, repeatable, and resilient. This is how we create value every day for customers, associates, communities, and shareholders, and why we entered 2026 with confidence. With that, thank you for your attention. And Sharon, please open the lines for questions.

Thank you. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A queue. Thank you. We will now go to our first question. And our first question today comes from the line of Frederick Wilde from Jefferies. Please go ahead.

Good morning, Fran, Yolanda, and J.P. Thank you for taking my question. So the first one is, would you be able to help us understand the competitive and consumer environment at the moment in the U.S. and your outlook there for 2026, including things like food inflation and how you expect volumes to develop? Secondly, you mentioned, Yolanda, a cadence throughout the year. Given what's happening in Serbia, given, you know, maybe some of the US pressures we're seeing at the moment, can we take those comments to mean that you're expecting the year to sort of sequentially improve as we go through it? Thank you.

Thank you, Frederik, for your questions. On the consumer sentiment in the US, If you read the newspapers, people think, hey, this is a weaker sentiment than we had seen before. We also saw here and there reports of negative volumes in the U.S. in the market in itself. If you look at our numbers, we came out the 2025 year with positive volumes in the U.S., with flat volumes in 2025, the fourth quarter. And I think this is also – caused by the fact that we have very strong market positions, number one and two positions in the U.S., that we are very connected to our communities, that we have a very good proposition, that we invested online technology and in our stores. So I think we are competing quite strongly. On inflation, we see a food at home northeast inflation of 2.2 at the moment. And if you ask my prediction, which is not too easy, then I think we see a flat inflation 2.2 going forward in the 2026 years. That's how we calculate this. So that's a little bit on inflation. That is on consumer sentiment. And when people talk about consumer sentiment, sometimes we forget two things, that we are in a food business, so we're not in a discretionary type of business, that we have a very strong brands number one and two position, 90% of our sales. And that we, and try to convey this in my note, that we have very strong community connections. And the element of trust is super important. And that's what we've earned over the years. And that's only strengthened during COVID. And that's, I think, what we also benefit from now. Plus our price investments, a $1 billion price investment over four years in the U.S. Our strengthening and growing own brand share. So I think we have a good proposition here to support the customer journeys, and not only physically, but also online and also through AI and technology. Jolanda.

Yes, and thank you for your question. Good morning. Yeah, the cadence, as we guided in our storyline just now, we are confident. We started the year well, and we have given a guidance of around 4%. That cadence is something that we don't want to dive into. Europe and U.S. might have different cadences for a start. And we want to allow ourselves the flexibility to invest where we see an opportunity and do that in the perfect cadence to create value for our customers, but also for our shareholders, of course.

And we are in a growth strategy together.

Yes, that's what we're heading for.

We are going to grow the business.

And that's what we're investing in.

Yep. Thank you.

We will now go to the next question. And your next question comes from the line of Sridhar Mahankali from UBS. Please go ahead.

Good morning, team. Thank you very much for taking my question. Maybe just a big picture one, just trying to understand how you approach margin on a group level because you consistently talk and communicate and guide on a group margin level. Is that how you run internally as well as in if you expect some weakness, let's say in Europe, you try and say for it in the U.S., obviously within limitations of what you can do on pricing and costs. Does that explain probably a much stronger than expected U.S. margin in Q4? That's the first question. Secondly, I found it to be amazing if we could – dive a little bit into where we are.

Sridhar, could you speak up a little bit, Sridhar? Could you speak a little bit louder because it's a little bit difficult to understand.

Sridhar, my ears are less strong than Francis' ears, so I need your ear.

Speak up a little bit. Sorry, sorry. Of course, I'll just repeat. Just a real question, first one on how you approach group margin. because you consistently guide on a group margin internally do you actually manage it as such as in when you see potential weakness in one part of the business you try and lean into another to deliver the group margin consistently so that's the first question second one is just in terms of where we are on the stock and shop reinvestment price investment and how close to completion Are we now, given Stop and Shop seems to be progressing in terms of a recovery? So if you can just talk through a little bit more on the reshaping of Stop and Shop offer and where we are in the journey, that would be very helpful. Thank you.

Thank you, Sridhar, and thank you for helping us out here. So your question, I'll take the first one on group margin. You know, our business is local, and we optimize our businesses on that local opportunities and challenges that we have. We're not balancing out in the portfolio as such. We're managing the optimum business by business and back end, and that's the strength of our model. We try to combine our scale to support those businesses locally. So I think that, in short, answers your question.

Yeah, and I think also, Sridhar, we would like to stay as competitive as we can be on brand level, for the U.S., for example, on country level or brands in Europe or in the Benelux. I think that's our promise to customers, our commitments to make sure that we have the local proposition as strong as possible. And then in the mix, we see the results, of course. At the same time, to stay competitive, we invest a lot in prices. And, of course, you know that we have a very strong cost-saving program, which Jolanda already talked to. And that plan we also manage very strictly, too. So I think that's where we get the funding to support locally. It's a local business, Riddar. You can't say, well, we take more money in one brand to subsidize another one. That's not how retail is working for us.

So much all. Maybe very briefly just on that point. U.S. margin was clearly stronger than most of us were expecting. Was it ahead of your expectations? Because you clearly guided the stable margin. Yeah.

Yes, Sridhar, to be totally transparent, it was above our original plans. And, you know, as it is in groceries, you know it as much as we do, it's lots of small things. And if they all come together a little bit more positive than you expect, then you can outperform. And let me mention just a few of them. If you look at our product mix, we sold more fresh than center store. That's a little support to that margin. We saw that vendor allowances were a little bit more positive. Our online profitability is improving. So it's many small elements all coming together, having small impacts as such, but then together you outperform. So, yes.

And a strong holiday season, then.

Ah, a strong ending of the year. So sales flow through. It was all the elements. Yes.

Thanksgiving, great. Christmas, great. Diwali, also great, by the way. So we had a strong holiday season. And strength numbers also went down because if you have high sales, then also strength numbers come down. So a lot of things in the right direction. So I'm not surprised because we have a strong team there, but I think it was stronger than we would initially have expected. Yes. Finally, before you mix in another question, Frida, we now go to stop and shop. It's a good question. We now go to stop and shop. Stop and Shop, we invested in prices as we promised ourselves and our customers. And in 2025, we were in 65% of our sales, 65% of our sales, we made our price investments. This will go in 2026 up to roughly 80%. So we make additional funding available for our price investments. At the same time, Roger and his team, first of all, a very dedicated, enthusiastic, energetic, and a partly new team, they made quite some changes. They are now very focused on execution. Availability of product is much better. Labor costs are better under control. Better service for customers in stores. Better mentality and We see also now that with the relief of the 32 stores we closed, we have now a much better store set for Stop and Shop as well. Also, Stop and Shop, as you might know, has a very high online penetration of around 11%. So, also there the omni-channel is very strong. We see MPS going up for Stop and Shop. We see price perception within the MPS also getting better. They enjoy the higher penetration of our private brands. Products as well for Stop and Shop. So a number of things are going in the right direction. And at the same time, we also remodeled 30 more stores for Stop and Shop with a different type of frame. So Stop and Shop also there, good momentum. And you have heard me and Yolanda earlier, the good momentum is great, but we would like to see this a few quarters more. before we completely embark on this journey. But also there are compliments to Roger and his team what they happened. There's a new wind, a positive wind blowing at Stop and Shock for not only the associates, but also for our customers.

Very clear.

Thank you, Frieder.

No follow-up questions.

Let's try to not follow Frieder's lead on that one. Three for the price of two.

Well, thank you. We will now go to the next question. And your next question comes from the line of William Woods from Bernstein. Please go ahead.

Good morning. Obviously, there's been kind of clear debate over the U.S. margin trajectory over the last couple of years, and you showed good results today. When you look over the next year, how does your strategy change in the U.S. as you go into the second and the third year of the strategy? And do you think we're at the trough of the U.S. margin today? Thanks.

William, for that question. You know, my sign, boring, but I think I explained earlier, boring for me is the new exciting. We continue on the journey that we shared with the markets when we launched our growing together strategy. I think in our business, it's important to get in a good rhythm in a cadence and then deliver on that cadence. So no big changes expected in the new year. It's, you know, fighting to support our customers every day. with the best prices possible, continuing with those price investments that we announced, opening up more stores, doing the remodels, driving growth, and sharpening our competitive position. So, no spectacular changes. It's continuing what we embarked on.

Linda mentioned earlier, William, the 2.7 billion capex in our total company. The growing part of this is going into technology, AI, and these kind of elements. that is also counting for our U.S. business, of course. So when we see digital AI both in the efficiency part and the forecasting part, but also in the consumer-facing part, we do a better and better job, loyalty, personalization, and these kind of things. So we should not forget that also that positive trend of growing more into technology investments is also still continuing as well.

maybe last but not least, because we just delivered the 1.3 billion on, say, for our customers. You know, the next round is already, of course, heavily in because we have another target of 1.25 billion also for this year. So it's also that relentless focus on exactly what Fran says, using AI, automation, looking for ways to drive our cost down because year on year, of course, it's getting a little bit tougher to realize those targets. So we're overly also heavily into making sure that we drive those cost savings because that's one of the pillars of our success going forward.

Understood. Thank you.

Thank you. Your next question, please, comes from the line of Rob Joyce from BNP Parida. Please go ahead. Hello, Rob. Are you on mute?

Apologies. Yeah, maybe I was on mute. Sorry about that. Thanks very much for taking the questions. So the first one is just the investor event a couple years ago you talked about high single-digit percentage EPS growth as an algorithm. If we look at 26, I guess, X to 53rd week, we're probably not quite getting there. Just wondering what the headwinds are you see in 2026 to that and whether that high single-digit percentage EPS growth is still the right growth rate to think about for the medium term. The second one sort of follows on from that, I guess, though. It's just if we look at the U.S., I mean, outside of potential consumer weakness, we've got snap cuts, JLP1s more readily available, Walmart taking share, Amazon gaining more traction with its online grocery business. I mean, why would we not expect the U.S. to slow down on the top line meaningfully in 2026? Thank you.

Well, thank you, Rob, for that question. So, first of all, our growing together commitments was high single-digit growth on EPS over the four-year period, and we stick to that commitment. If you look at our 2026 guidance based on the 53 weeks that we have in that year, we guide on a mid to high single-digit growth again. You are right. If you take out the 50, the impact of the 53rd week, Of course, EPS is impacted. Two elements to keep in the back of your head. There is a Serbian impact. Serbia used to be a profitable business, guiding well in our European average margins. It's now a loss-making business, so that is included in our guidance, and we're also fighting to repair that issue, one could say. So Serbia has an impact, and also don't forget, the 53rd week, it is money that will be banked, and it is part of that four-year trajectory of growing together.

On your second question, Rob, yeah, it's pretty competitive out there in the U.S. That's what this business also makes it also exciting. But we are used to this already for a longer time. This is not a new phenomenon in itself. The elements I just would like to stipulate here is that we have a business which is now better positioned than before for growth. We have a better supply chain. We have a stronger own brand offer. We are investing in pricing, and we will invest more in pricing, the one billion in four years you have heard. We are growing our total Food Lion network, not only by stores, and we will open more stores for Food Lion. That is also a new trajectory, but we also keep remodeling our existing fleet. and where there are opportunities for Foodline to dance up, let's say, the footprint by potential acquisitions, then we also will look at this. Technology and mechanization will help us to reduce in cost or get a better customer journeys. So, and we talked about it earlier, when one of the largest competitors in the U.S. is gaining share in the Carolinas, That does not mean that we lose. We win share with Food Lion in the markets where we operate, those states in the southern part of the eastern seaboard. And that is because we are connected to our customers. We are very local. We have very good networks. And we have great people. And I think that is not changing. I also heard that a marketplace player is also closing a few stores in the fresh areas. which is also telling us this is competitive and food retail with the margins we make is not easy. And that's why I think also experience and good people kick in as well. So competitive, yes. Are we able to compete? Absolutely. We think that we also gained market share in the fourth quarter in the U.S. and with positive volumes. I think we have, yeah, a good start for 2026 also. when we look at the first period of the year. So competitive, but we are in a fighting spirit and the teams are really, yeah, very geared up for the journey.

Okay, so you think you're well positioned to keep taking chair front, sounds like.

We come back to quarter by quarter, Rob. Don't jinx it now.

It's our ambition.

No, we have a growth strategy. And you know that our growth strategy means two things. It means volume growth and market share growth. And that is for every brand individually, the task. And that's how we construe our plans. And then we have to see how that works out and how strong we really are.

Thanks very much.

Thank you. Our next question today comes from the line of Ferdinand de Waal from the . Please go ahead.

Yes, good morning. Two questions my side. One is about Europe. If you look at last year, 25, you had quality dilution of the acquisition . You had Serbia. That's now most in the base. What should withhold you from higher margins in Europe in 26? And then the second one is from Albert Hein. You are now at 38% market share. I think competitors are trying to move. How do you look at that going forward?

Thank you for that question. I'll take the first one in front. We'll take the Albert Hein question. We had the first year integration of Profi, and indeed, we are now positioned for growth in Profi, so we envision to open up more stores and drive growth there, and we will get some of those first synergies kicking in. We expect Profi will take around two to three years to land at the European average margin, so I would not say we're there yet. We are on a journey, and we look forward to that. Serbia, of course, is an impact that was only slightly in last year because it started, the decrease started September 1st. So that is for sure a difference versus last year.

And then for now on Albert Heijn. Yes, this is a very impressive market share. You rounded down to 38%, but it's a very impressive market share. But this comes with zero arrogance in the marketplace. So the teams have designed their commercial plans for 2026. We might see a few brands in the Dutch market which have the intention to bounce back. We have almost 12% growth of our online in Q4 for Albert Heijn. And we also would like to make sure that we stay growing online as well, a double digit for Albert Heijn. We look at strengthening our journeys and our portfolios. We have 1,900 organic products where we are absolutely the leader in differentiation, same for convenience, same for new solutions. So the creativity is there with the team. Online will be an important component to grow. And I think that means also if you look at price investments and we know the price favorites where we were 2,000 items, have the best offer in the market, that will also continue that focus, that we make that promise work as well. So, Albert Heijn, you talk about the Netherlands, but Albert Heijn is also doing a great job, by the way, in Belgium. Also there, we had a very strong result over the year, and also big plans to grow our business there as well. So, in short... Keep very focused on the omnichannel proposition, zero arrogance. Use the innovation you have in your team to build better products, better private label, which is well over 50% share now at Albert Heijn, and work strongly on your cost as well, because also their price investments have to be invested also through cost savings, and that is for Albert Heijn not different than for anybody else.

Maybe one last question on working capital. How far further can you stretch your accounts payable?

Sorry, the mic went off. I don't know what Frans was doing. You know, a strong year-end sales, of course, means that your inventories are temporarily a bit lower and your accounts payable are a bit higher. So that's also a timing impact of, one could say, backward sales or a good year ending. We're not expecting to stretch our accounts payable any further. We're just dealing with it as we should be as a good partner in crime also for our suppliers.

And the 53rd week, does it have impact on your working capital?

It will have a bit of an impact, of course, but what we will do, as we always do, we will disclose any impact of that last week in our communication to the markets in a very transparent way. Okay, thank you very much.

Like you did already for sales effect and total net margin.

And also in the reporting, we will make sure that the impacts are very clear.

All right, thank you.

Thank you.

We will now go to the next question. And the next question comes from the line of from Bank of America Securities. Please go ahead.

Yes, good morning. Thank you for taking my question. You mentioned that AI and other technology are shaping the way you're operating. So you mentioned a few examples, but can you potentially elaborate a bit more and give us a bit of color about the type of productivity gains you can expect and potentially an indication of the scale so magnitude of gain you can get there so even what is the contribution to the cost savings potentially. The second question will be on online. You mentioned it's profitable for the first time, you know, in 2025. Should we think about, you know, online being a potential driver for margin expansion going forward and what are your expectations for 2026 and beyond?

Thank you, Xavier. On the question of AI, and AI is, of course, an interesting subject. It's as if this is just new to us. I mean, we're working over many years on AI solutions, if it's robotization, if it's our financial processes, if it is making predictions for our demands, looking at our apps for consumer facing, And we have now a lot of new features as well. So there will be a lot of AI and opportunities in mechanization. We do a lot of things on recipes and even more creative solutions for customers. You saw what we, when we talked about the spot and shop, make a picture the lamp or the pair of shoes with your neighbors you like more, and you make a picture loaded in the app for a ball, and you get a suggestion where you can buy these kind of things. So we have a lot of back-end solutions, robotics, mechanization, forecasting, marking down to avoid food waste. We talked about it earlier. And more and more, we get even more consumer-facing opportunities with visual search and all these kind of things with AI is giving us. So a lot of things happening there. The other thing is that you might have noticed that we also got a new chief technology officer on board with Jan Bricht. And Jan Bricht is working very closely, of course, with the IT and digital and tech teams. And I just came in here. I just bumped in a room today in a meeting room where they were talking about – our group focus area work group on AI, where we also bring Americans and Europeans and central people together to see, hey, what can we learn from each other? And we can learn a lot from the U.S. as well. What can we learn from each other to make even those propositions more standardized, in the end, cheaper in serialization, and to scale it up? So a lot more to come. And I think we will talk every quarter about the new features like we did today as well.

In your second question, and thank you for that, online profitability margin going forward. We look at online in a holistic way, so we're not separating it anymore. Of course, we have those numbers, but we don't separate it in this, okay, it's margin dilutive, and how do we balance that out in the portfolio? We drive growth. Online is a core driver of that growth. And from a holistic and more strategic point of view, having those online customers, which creates indeed growth. It also gives us access into people's daily lives. We can design personal assistance that going forward will give us strategic opportunities, give us data. We can do the personalization. So there are many elements for us that are so much more important than just an online business and a dilution. We indeed communicated half 2025 that we are now online profitable in the group, that profitability is increasing and improving. So going forward, we double down on online, also as Fran stated, for example, for Albert Heijn. We find ways to improve our profitability even further, and we're quite confident that as a part of our overall strategy, this will benefit our customers, our company, and also providing the returns to our shareholders that you could expect to have from us from a holistic point of view.

Okay, thank you.

Thank you. We will now take our final question for today. And the final question comes from the line of Francois Degas from Kepler Subro. Please go ahead.

Good morning. Thank you very much. Could you elaborate on the online sales growth in the U.S. in 25 and specifically in Q4? I would appreciate a deep dive if you could help us to understand the main drivers behind this performance and how sustainable do you believe this growth is, I would be interested to know how you share the value with your click and collect partners in this business. Thank you very much.

Thank you, Francois. Bonjour. Twenty-three percent growth in the fourth quarter is of course magnificent. Thirty-five percent for FoodLine. And you could argue that it's a little bit from a lower base in itself, but it's still amazing. penetration getting over 9% now. Stockman Shop historically already in very high participation, but also growing there to over 11%. So, a very positive penetration growth in all the brands we operate. We operate very different than before. As you know, we are now having our click and collect options powered by Prism, own developed software. which gives us, first of all, efficiency, picking efficiency, but also a much better customer connect and a much better customer journey in that online click and collect, let's say, part of our proposition. We also partner with DoorDash and Instacart. That is going very well. We might address that we might find another strong partnership too, which is going to fuel extra growth So, we talk about online a lot. The teams are so convinced that omni-channel is the name of the game. Those customers are more loyal, store and online connected. Jolando already mentioned that we also got a fully allocated profitable and even more profitable. That's also good news. And of course, online and these kind of things are more linked to AI efficiency, but also more linked to retail media at the same time. And therefore, that online growth is also for us a very important element of having a better deal, having a better proposition for our customer base.

Maybe adding to that, Frans, I mean, if you look at what is driving our growth next to all the points that you mentioned, if you compare it with some of the competitors in the market, you have access to a very large assortment on our Prism portal. So that assortment and the breadth of it, I think, helps. And it's fast. So, we have a delivery time of three hours, which compared to some of those other also huge players, that's high speed. So, speed and assortment probably also helps to win customers over.

Yeah. And if you're in Brooklyn with your Eastern European assortment, then you pick your online order in that store, your store and your assortment. So, it's store specific. It's a unique Prism proposition. I think that's also different than a few of those, let's say, more centralized online things. Also, there we are local. Also, there we give our customers their local store in the mobile phone.

Thank you. And how sustainable do you see these trends? Because 20% is just punishing.

For the full year, it was 18. Which is also quite high. Which is also quite high. So double-digit growth is for us important. I think I would leave it there. I mean, and as I mentioned, 35% for Foodline, but they have to catch up a little bit because they were at a lower penetration. So they will grow faster, I think, but double-digit growth is our plan.

Great. Thank you very much, and congrats. Thank you.

So thank you, Francois, and thank you, everyone, for joining us on the call today. Thank you, too, Sharon. We'll be out on the road, as usual, tomorrow and over the next seven or eight weeks, so happy to catch up with you. And if we didn't get your question today, we'd gladly give you a call now after the call. But thank you for your attendance.

Thank you, indeed, and see you next time.

Thanks, Sam. Thank you, Jebby, as well, for all the preparations. Yes. Yep.