Koninklijke Ahold Del Ord

Ladies and gentlemen, good morning and welcome to the analyst conference call on the fourth quarter and full year 2021 results of Alvarez. Please note that this call is being webcasted 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 Summary Report, Fourth Quarter, and Full Year 2021, and also in Al Deleuze's public filings and other disclosures. Al Deleuze's disclosures are available on aldeleuze.com. Forward-looking statements reflect the current views of Al Deleuze's management and assumptions based on information currently available to Al Deleuze's management. Forward-looking statements speak only as of the date they are made, and Al Deleuze 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 Al Deleuze. At this time, I'd like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you and good morning, everyone. I'm JP O'Meara, Head of Investor Relations, and I'm delighted to welcome you to our Q4 2021 Results Conference Call. On today's call are Franz Mutter, 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 holdalaze.com, which provides 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 yourselves to two questions. If you have further questions, then please re-enter the queue. I'll now turn the call over to Fran.

Thank you very much, JP, and good morning to everybody. We ended 2021 on a strong note, with positive fourth quarter group comparable sales momentum and group margins in line with the prior strong year levels. As we begin the next phase of our leading together strategy, announced at our investor day last November, we are well positioned to execute against our ambitious growth plans. This is all down to the continued dedication and hard work of our people. Looking back on the past year, I'm again most proud of how Associates brought our values to life. In the way they responded to the ongoing developments, Associates with COVID-19, as well as natural disasters, including major floods in Belgium, tornadoes in the Czech Republic, fires in Greece, and Hurricane Ida in the US. Through it all, Associates rose to the challenge to care for customers and communities. For the full year, our COVID-19 care investments totaled €364 million, including our commitment of €20 million in additional 2021 charitable donations spread evenly between the US and Europe. In total, our grants contributed nearly €200 million in food donations and other charitable initiatives across the globe in 2021. The pandemic highlights the importance of maintaining food and product supplies to local communities, a vital role that we remain focused on fulfilling, together with our brands and suppliers. And as a result, we enter 2022 with deeper relationships and trust with customers across our brands and our markets, with strong and growing market shares in both regions to build upon. Now let me highlight our key financial results on slide number five. The good news is our financial results in 2021 significantly exceeded our original expectations, with positive full-year sales growth and stable 52-week underlying earnings on a comparable basis versus record results in 2020. And you can see the 52-week comparable numbers in the appendix for your context. Our stable underlying earnings is of particular note. as we were able to deliver this result despite significant supply chain challenges, increasing inflatory pressures and the dilutive effects from rapidly expanding our omnichannel proposition. Due to our strong revenues and continued excellent delivery of our Save for Our Customer cost-saving initiatives, our underlying operating margins were again very strong relative to historical levels prior to COVID-19. As a result, I'm pleased that we exceeded our initial and later increased guidance for underlying EPS. Free cash flow overall generation, which is extremely important in this environment, also well exceeded our expectations. And this allowed us to take some additional decisions towards the end of the year that Natalie will walk you through later. Behind these results, our investment increased. in our omnichannel platform once again proved its worth during 2021. With 15 million active mobile app users and 1,642 pick-up points and click-and-collect locations globally, group net consumer online sales grew by more than 38% compared to 2020, representing a two-year stack growth of more than 105%. This positively impacted our 2021 group net sales, which at 76 billion euros was up 3% versus 2020 at constant rates, with 96% of our sales coming from markets where we hold the number one or number two position. In terms of the fourth quarter, we maintained the momentum we built throughout 2021 and produced group two-year comparable sales growth of 14.2%, accelerated from 12.2% growth achieved during the third quarter. And as I said at Invest Today and represented on Site 6, I truly believe we have a repeatable formula for growth in the US and in Europe. We have a strong operating model with our leading local brands supported by service brands who operate at scale and who leverage their best capabilities globally. Between now and 2025, We have four big priorities we are doubling down on for the next four years. One, serve our customers through deeper digital relationships. Two, accelerate the omnichannel transformation and continue to be the best local operators. Three, lead the transformation into a healthy and sustainable food system. And lastly, create the ecosystem for smarter customer journeys. These priorities tie straight to our vision to create the leading local food shopping experience. And with that in mind, let me spend a few minutes on some of the key operational highlights for the quarter and give you a sneak preview of what to expect in 2022. Looking at our consumer value proposition on slide 8 and 9, in the Netherlands, we launched the Albert Heijn Premium Loyalty Subscription Programme, which already boasts more than 300,000 customers. Giant Food, soft launch ship to me, an online marketplace solution, initially offering an additional 40,000 general merchandise and food items. And this has been extended to the food giant company as of January this year. The last started its first in-store kitchen in collaboration with TASTE, Tasty You. And in the Czech Republic, Albert expanded their e-commerce service to the greater Brno and Olomouc areas. And our U.S. brands also added new click and collect locations in Q4 for a total addition of 270 in 2021 to a total of 1,386. And we plan to add a further 150 plus of those click and collect locations in 2022. Looking at our operational priority on slides 10 and 11. In terms of using the power of data, we rolled out machine learning based store optimization tools for store managers at Albert Heijn. And rolled out a proprietary network optimization engine in the US, leveraging predictive analytics, which will be scaled to Europe in 2022. In stores, we continue to drive efficiency with electronic shelf labeling and expect more than 80% of our European grocery stores to be equipped by this year. We are also proud of the giant company's new e-commerce fulfillment center that opened in the Philadelphia market in Q4. It is supporting our ambitions to increase the amount of automation and speed in our supply chain, an important pillar of our leading-together strategy. We will be looking to take learnings and pilots several initiatives like this in Europe in 2022. Controlling our own destiny across our entire distribution network is an important principle we firmly believe in, particularly when it comes to fostering pace and agility in building out new digital capabilities. And in the near term, this will particularly be visible at world.com. where we look to reinforce the modern infrastructure we have carefully put in place for the brand over the last years. Momentum at bull.com remains solid, despite significantly less tailwinds as we left the harsher lockdowns from the COVID-19 pandemic over the last 12 months. The investments we planned for 2022 will kickstart a multi-year phase of investment to put infrastructure in place to match the volume growth, and new revenue opportunities we expect from a number of areas. First of all, the underlying e-commerce market growth projected in the coming years, where the total addressable market, including VAT, or the TEM, is expected to increase from €46 billion in 2021 to €63 billion in 2025. The second item is that our plans to increase our position in under-penetrated categories, as well as cross-category selling, which includes a deeper collaboration with our Benelux brands, announced at the investor day in November. And lastly, as well as the build-out and scaling-up of highly accreted service capabilities in advertising and logistics, we estimate the digital advertising market alone in the Benelux as a 10% a total addressable market of just under 5 billion euros. For 2022, the sub-IPO of Bol.com is one of our top priorities. We are excited about this chapter in Bol's evolution and continue to progress on our plans to get Bol.com ready for a sub-IPO during the second half of 2022. Nathalie will also share more details on our progress here in her commentary. Moving over to slide 13, and moving over to healthy and sustainable, the priority we have there. Throughout 2021, food at home consumption and the focus on healthier eating were trends which proved very resilient. And I'm particularly pleased with the share of total on-brand food sales from healthy products of 53.6% in 2021. should be accessible and available to all. We are working towards this with our Grounded in Goodness strategy that focuses on both healthier people and a healthier planet. Grounded in Goodness, officially launched in 2021, is based on the idea that the world health crisis and climate crisis are intrinsically linked. We believe that if we get it right for ourselves, we usually also get it right for the planet. And acting responsibly today is imperative to securing a better tomorrow for generations to come. In this respect, during the fourth quarter, we were pleased to have returned an upgrade to our MSCI ESG ranking to AA from our previous single A ranking. We also maintained our standing as a leader in the Dow Jones Sustainability Index. Our score of 83 out of 100 was well above the industry average of only 26 points and placed as highest amongst food retailers in Europe and the US. We also expressed our intention to make continued progress on the ESG front through our decision in the fourth quarter to pull forward our commitment to reach net zero carbon emissions across our own operations by no later than 2040 for scope 1 and 2. We focus primarily on reducing energy consumption, which is more than half of the emissions, refrigerant or coolant leakage, more than one-third, and transportation. And we will actively apply this lens as we invest in our future. For example, at Bold.com, we recently reached an agreement to acquire a majority stake in Cyclone, a green and social delivery expert, which will help support Bold.com's last-mile delivery ambitions and their sustainability efforts at the same time. As we look towards 2022, another top priority for the company is doing more homework on what it will take to become a net-zero business across our entire supply chain, products and services by 2050, the so-called Scope 3. And we try to be even sooner. In our industry, Scope 3 represents around 95% of our emissions. Our value chain is immense. We sell over hundreds of thousands of products and have thousands of suppliers worldwide. We are currently working towards an updated target and detailed plan for Scope 3, which will be announced later this year. We have joined the business ambition for 1.5°C, a global coalition of UN agencies, business and industry leaders, in partnership with the Science-Based Targets initiatives, and the United Nations left campaign Race to Zero. This means we also set interim science-based targets across all relevant scopes and in line with the criteria and recommendations of the science-based targets initiative. There are three important elements in our approach here. We need to actively help farmers with the green transition. We need to standardize healthy and environmental product information for consumers, and we need full support from governments in setting clear standards and regulations. Finally, let me spend a moment on our outlook for 2022 on slide 15. While we have already talked about several key initiatives to support comparable sales growth and further elevate our best-in-class omnichannel offering, let me address the one hot topic in the financial community for this year, namely inflation. Our role as retailers is to provide value to customers. We pride ourselves on being the best local operator, and we will prove our strength in this area and turn the headwind into a competitive opportunity as we navigate the inflationary environment. As I have said many times before, the supermarket business has a deflationary role for customers. This is because we have strong insights into which price increases are justified through our acute cost models, which deconstruct products down to component materials. For example, raw materials, packaging, energy, transportation, and labor. So that we have a good sense of what a product should cost. Given that 30% in the US and 50% in Europe of our products are our own brand, which is industry-leading, by the way, we have exact and broad knowledge, which gives us a significant advantage over competition. While negotiations with suppliers are tougher in this kind of environment, we work hard to make sure to only accept price increases that are justified to pass on to consumers. And you will have seen in the press just how we prepared we are told holding the line aggressively with our suppliers when we see unjustified price moves in our markets. Beyond that and keeping the customer basket in mind, it's important to stress that our 19 brands over price ranges for every wallet. It also goes for healthy products, so customers can maintain a healthy lifestyle. An attractive private label offering, good promotions, but also everyday low prices, like with the prized favoriten, prized favorites with Albert Heijn, or extra discount on healthy products with the Super Plus loyalty program in Belgium, or the giant choice rewards loyalty program in the U.S., are all parts of our toolkit to help customers continue to enjoy good value and a healthy basket. From a business perspective, as you have seen with our Q4 numbers, we are navigating the elevated levels of inflation very well. Our gross profit continues to grow in line with sales. In general, we see pretty rational behavior amongst competition in the markets we serve, as this is an industry-wide phenomenon. And while we are still waiting for some data, our market shares continue to improve, underpinning the quality of our customer value proposition. While current inflation levels are indeed elevated, we expect inflation to moderate in the second half of this year, and also supply chains get back on track. So, taking all priorities together, 2022 will be another busy year for our company. and we believe another rewarding year for shareholders. And given that we are currently seeing many signs of reopening from the pandemic around the world, our 2022 outlook reflects a further strong underlying operating performance in that context. We work hard on achieving our goals and keeping the focus on long-term value creation. Finishing on that note, let me now hand over to Nathalie, who will ask for actual comments on the quarter and provide further specifics on the outlook.