Koninklijke Ahold Del Ord

Ladies and gentlemen, good morning and welcome to the analyst conference call on the fourth quarter and full year 2022 results of AHOL-Delhaize. Please note that this call is being webcast and recorded. Please note that in today's call, forward-looking statements may be made. All statements, other than statements of historical facts, may be forward-looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in the statements. Such risks and uncertainties are discussed in the summary report, fourth quarter and full year 2022, and also in AHOL Delhaize's public filings and other disclosures. AHOL Delhaize disclosures are available on aholdelhaize.com. Forward-looking statements reflect the current views of AHOL Delhaize's management and assumptions based on information currently available to AHOL Delhaize's management. Forward-looking statements speak only as of the date they are made, and R. Holder-Heise does not assume any obligation to update such statements, except as required by law. The introduction will be followed by Q&A session. Any views expressed by those asking questions are not necessarily the views of R. Holder-Heise. At this time, I would like to hand the call over to J.P. O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, J.P.

Thank you, operator, and good morning, everyone. I'm delighted to welcome you to our Q4 2022 results conference call. On today's call are Franz Muller, our president and 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, aholdeles.com, which also 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 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. I'm now happy to turn the call over to Fran.

Thank you very much, JP, and a good morning to everyone. I'm pleased to report a strong end to an exceptionally challenging year. In the food retail industry, our company, Ahot Deleuze, is truly unique with significant and compelling competitive advantages. And these stem from, for example, the relative market share strength of our great local brands, our international and regional scale, operational excellence, and a well-invested asset base, and our strong cash flow generation and financial position. Together, these enable us to absorb the impacts of dynamic economic cycles without sacrificing long-term investment and value creation. On slide 6, 2022 was another exceptional year with very challenging and definitely dynamic market conditions. We have seen double-digit inflation levels on both continents for the first time in 40 years, an energy crisis created by the war and the ongoing effects of the global pandemic on people's lives. Our role during this time has been clear, providing a strong and competitive value proposition and keeping shelf prices as low as possible to support our customers. In this respect, there are three areas in particular we've excelled at in 2022. First, deepening our relationship with our customers by optimizing our digital engagement and loyalty programs, Our brands are interacting with 30 million active users in new and innovative ways. Secondly, expanding our own brand and healthy assortments. These options resonate strongly with our customers. And thirdly, we are diligently applying our knowledge and experience in supplier negotiations, while at the same time also delivering improvements in our own operations and end-to-end processes. As you can see on slide seven, this is evident in our Save for Our Customer results in 2022, where we generated 979 million euros in cost savings, which is 130 million more than we originally planned to. We did this by tightening our own belt, by lowering structural cost and streamlining processes, creating more agile organizations, capturing scale and empowering our people to take action to drive efficiency. Our new operating model in the Central and Southeastern European markets and bold.com plan adjustments and being good examples. I'm proud of our associates. I'm super proud of our associates who consistently leave no stone unturned in service of our customers. And I'm also proud of how our brands participate as important members of their communities. During 2022, our family of great local brands contributed €218 million in cash, products and food donations to local and regional food banks, hospitals and non-profit organizations. A few highlights here include the Food Lion Feeds program, which donated its one billionth meal since inception in 2014, and is well on the way to reaching its goal of 1.5 billion meals donated by 2025. The last Belgian donated emergency generators to the Ukrainian Red Cross, ensuring 95,000 Ukrainians continue to have access to clean water and heating. And Hannaford launched its Eat Well, Be Well, a path to better health initiative, that will provide $1.5 million in funding to local non-profit organizations to increase access to healthy, fresh food, as well as provide nutrition education tailored to the specific needs of an individual health condition. I would also like to offer our sympathy and condolences in light of the earthquakes that struck both Turkey and Syria last week. AHAdeles does not operate in the region, but of course, the ties to Turkey are manifold. being it through our associates and customers of Turkish descent, our suppliers and as fellow citizens. All the less centrally and many of our brands in Europe are supporting charitable organizations and facilitating customer donations through their store and marketing communication channels. This 360 degree relationship where I talked before between our brands, our customers and our communities is underpinned by our purpose, eat well, save time and live better. And it's a cornerstone of who we are. Our financial performance in 2022 builds on the strength of these relationships as customer vote with their feet and their clicks. Taking a quick look at our overall scorecard for the full year as presented on slide nine, we achieved or exceeded all of our key goals. As I mentioned in my opening, with a strong end to the year, with sales in Q4 increasing over 8%. Comparable store sales excluding gas grew 7.9%. Net consumer online sales increased 5%, and our online grocery sales were up 14.4%. Leveraging these strong sales, we delivered an underlying operating margin of 4.4% and diluted underlying EPS growth of 22.6%, at actual rates. And as in prior quarters this year, strong operating performance in the US, as well as the foreign exchange and interest rate changes drove earnings growth despite continued margin pressures in Europe. The underlying strengths of our brands is something we are proud of when navigating this environment. So let's look at a few examples. A great example of brand strength is the group's biggest brand, FoodLine, who enjoyed its 41st consecutive quarter of comparable store sales and that growth in the fourth quarter. The brand continues to elevate its omnichannel capabilities with Food Lion To Go, now available in 655 stores with 50 additional planned for 2023. Food Lion also on top of this has been recognized by Newsweek as one of America's greatest workplaces for diversity. And with its easy, fresh, and affordable positioning over the past 10 years, Pushline's success really epitomizes the potential for growth and market share with a relentless focus on the customer experience, keeping stores vibrant and modern, adding new digital features and functions, and investing in our associates and culture. And in that period, the brand has increased sales per square foot by over 80.80%. Moving on to Albert Heijn. With a particular strength in innovation, technology, and analytics, the brand continues to win market share. For the full 2022 market share, the market share was 37% for that 2022 last year, up 130 basis points versus 2021. In the fourth quarter, Albert Heijn introduced dynamic discounting in its stores. enabling customers to purchase certain products nearing the end of their shelf life, with discounts ranging from 25 to 70%. The discount which is displayed in the digital price tag is determined by an algorithm developed by Albert Heijn, which calculates the best discount, so that unsaleable products can be reduced dramatically, which leads to lower waste and great deals for price-conscious customers. The fourth quarter also marks the one-year anniversary of Albert Heijn Premium, who now has nearly 700,000 members. Albert Heijn Premium builds on the Albert Heijn Bonus Card, which last week celebrated its 25th anniversary. The Bonus Card has undergone huge developments in terms of convenience, value and engagement since 1998, with many of the features and benefits also being exported now into our other European brands. Finally, Albert Heijn entered into a partnership with Jan Linder Supermarkets with the majority of stores to be converted into Albert Heijn franchisees on receiving the required approvals. And this will make it our largest franchisee and the agreement allows us to expand our regional coverage in the southern part of the Netherlands. Moving on, let me spend a few moments on two other brands we are investing in which have significant potential and play an important role in our long-term fundamentals. Stop and Shop and Goal.com. At Stop and Shop, we are increasingly encouraged by progress with double-digit growth in our remodeled New York City stores. We plan to remodel further eight stores in New York City in the first quarter of 2023, as well as rolling out key learnings to 40 other urban stores with a strong multicultural penetration, for example, Boston and Hartford. And this we go to do throughout the year. Another area where we are seeing progress is within e-commerce, where penetration rates increased 70 basis points to 8.4% at Stop and Shop. This growth is partially driven by the expansion of same day delivery and the introduction of two hours click and collect, clicks and collect across all stores during the year. Stop and Shop is also piloting additional pickup options. providing customers the ability to shop in a manner that is convenient for them. And we also continue to refine deal lock in an effort to communicate consistent value messaging and promotional pricing to our customers. At bold.com on page 14, for the full year, GMV excluding VAT was 5.5 billion euro, down 1.9%. Net consumer online sales were down 1.8% in 2022 against the market, which declined around 6%. As we left lockdowns in the fourth quarter in the Netherlands, which will also negatively affect the first weeks of 2023, net consumer online sales were down 2.9% in the fourth quarter. As you will remember during the year, we made some significant adjustments to Bold.com's medium-term plans to adapt to the current environment. And as a result, despite higher investments in the business, cost increases and sales deleverage, Bull.com remained EBIT profitable and delivered 125 million in underlying EBIT DA. Looking to the future, I'm particularly excited as we see the first green shoots from our investments in new revenue streams. For example, Bull.com advertising revenues are up over 40% versus prior year. This includes over 70% growth in both sponsored product and growth in advertising revenue from other external sellers. Logistics services revenue was up almost 20% versus the prior year. In 2022, Bol.com has continued to expand its market position by growing share, therefore continuing its strong track record of winning in the market. Bold.com delivered strong and double-digit sales growth in emerging categories, such as daily needs, outdoor and fashion, whilst maintaining strong growth in existing markets, such as domestic appliances, which was supported by initiatives such as the Smart Shopping page to help customers save money by highlighting energy-saving products. As these areas compound, I expect a meaningful improvement in Bold.com's performance over the coming 12 months, which continued growth across most of our core categories and strong revenue progression in both advertising and logistic services revenues. So that concludes my comments on 2022. And with that, let me hand over to Natalie to talk more about the financials in the quarter, and I will be back to discuss our outlook and priorities for 2023.