Koninklijke Ahold Del Ord

Ladies and gentlemen, good morning and welcome to the Analyst Conference call on the first quarter 2023 results of Aarhus Delhaerde. Please note that this call is being webcast and recorded. Please note that in today's call, forward-looking statements may be made. All statements other than statements of historical facts may be forward-looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in the statements. Such risks and uncertainties are discussed in the Interim Report, First Quarter 2023 and also in Ahol del Herza's public filings and other disclosures. Ahol del Herza disclosures are available on aholdelherza.com. Forward-looking statements reflect the current views of Aarhus Delhaerse's management and assumptions based on information currently available to Aarhus Delhaerse's management. Forward-looking statements speak only as of the date they are made and Aarhus Delhaerse does not assume any obligation to update such statements except as required by law. The introduction will be followed by a question and answer session. Any views expressed by those asking questions are not necessarily the views of Aarhus Delhaerse. 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.

Good morning, operator, and thank you very much. And good morning, everybody else. I'm delighted to welcome you today to our Q1 2023 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, aholdles.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 yourselves 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 a constant exchange rate unless otherwise stated. Therefore, I hand over to Frans.

Yes, thank you, JP, and good morning, everyone. I'm pleased to report a strong start to the year, which clearly reflects the trust and confidence our customers continue to place in our great local brands. In times like these, our international portfolio of number one and two local brands provides many advantages. On the one hand, it provides operational bandwidth and financial stability, and this means we can remain focused on our long-term growth and omnichannel transformation agenda. On the other hand, it allows us to successfully navigate short-term market volatility. This means we can actively counterbalance divergent trends to best support our communities and associates. For the quarter, the headline numbers are strong. Net sales grew by more than 6% to 21.6 billion euro and diluted underlying earnings per share were up 10.5% to 61 cents over the euro. Our earnings trends were consistent with our expectations, driven by strong operating performance in the US. This was partially offset by increased energy costs in Europe and impacts at the last Belgium, which I will come back later to. Foreign exchange shifts were also positive in the quarter, which as you know are expected to become a negative as we go through the rest of the year. While I am pleased with these headline figures, most important to me is the fact that we gained market share in most of our markets. The trends we have delivered in recent quarters continue to stick. Customers are buying more fresh and healthy products, more own brands, and are increasingly utilizing our growing omnichannel ecosystem. And this is not by chance. It's by design. As you know, our business is built on some key fundamentals that have fueled sustained success year in and year out. And these include building and relative market share and brand strength by knowing our customers inside out. Relentlessly delivering a high-value, high-touch customer proposition, reflecting the needs of local communities. And constantly introducing new high-tech, innovative and scalable platforms across our operations to keep the cost low, waste low and convenience and efficiency high. As we boost this formula by adding more integrated and real-time data into the mix, we are creating smarter and more sustainable customer journeys. This will dramatically speed up the pace of innovation we are able to bring to market, stretching our capability gap to competitors even further. So to contextualize a little bit more, let's look at a few examples where our innovation and operating excellence is really shining through. Let's start with Albert Heijn, our largest brand in Europe. With inflation levels in the Netherlands at 18% in the first quarter, I'm proud of how quickly the team pivoted the assortment to support customers. For example, Albert Heijn expanded its price favorites, which is a high-quality product private label at discount prices. They increased that range to 2,000 products, including the brand's most popular fruits and vegetables. Even more interesting for the long term was the first deployment of new technology around dynamic pricing and markdowns. Developed over three years by an excellent team of data scientists, this proprietary first of its kind and at scale solution is a game changer for us. And it's only possible given the maturity of integrated processes at Albert Heijn, linking together store processes, electronic shelf labels, and machine learning algorithms. I'm excited about the future value we will be able to extract for our company from this type of technology and therefore creating more value for our customers and at the same time also helping us significantly reduce food waste. The second example is about building deeper digital relationships at scale. A fully fledged, fully integrated 360 degree digital shopping experience is no longer a nice to have. It's, in the meantime, a must-have. And our foundation here is strong. For example, the loyalty program at Giant Food, Food Line, and Stop and Shop were named by Newsweek amongst America's best loyalty programs in 2023. In Q1, we delivered 2.7 billion personalized offers to almost 30 million households, with the number of those households digitally engaged also up well over 10%. The percentage of completely new customers to 80 USA brands in new sign-ups is also rising, a tell-tale sign of how important the digital ecosystem is becoming when consumers begin looking for value across the competitive set. This year, we will make further progress with the rollout of our Prism platform that brings together all the benefits of personalization, monetization, and a creative experience. The third example I would like to highlight is about the importance of store modernization. Food Lion exemplifies how powerful a clearly defined long-term plan can lead to growth and momentum. And while there were other factors, there is no doubt that the store modernization plan of the entire fleet of Food Lion stores from 2014 to 2021 contributed significantly to the 42 consecutive quarters of store sales growth we just reported. And as I outlined last quarter, Food Lion is now beginning its new multi-year wave of remodels under its omni-channel remodel program starting with 70 plus stores this year. The first batch of 29 will be completed this month in Wilmington, North Carolina. Here, sustainability also plays a major role in our plans, and we also look to extend FoodLine's tremendous 22 years track record as Environmental Protection Agency Energy Star Partner of the Year Award for its work reducing energy consumption. The omnichannel retailer is the only company in the United States to receive this honor already for 22 years. Moving on to healthy and sustainable on slide 11. We discussed the bigger picture as it relates to this topic at length at our recent AGM. However, it is also important to look at the tangible steps we make, both big and small, quarter in and quarter out, that make the difference. And I'm proud of the many accomplishments that you can see. In our sustainability work, collaboration across the whole value chain and transparency supported by external validation is critical. As a society, we will only succeed with our climate plans if we work together. Good examples here are Albert Heijn and Bold.com, opening up their best practices and programs to other industry players. For example, Albert Heijn has recently opened to third parties the Better for Farmer and Nature program. And this program aims to improve animal welfare, the environment, and farmers' earning power. Bold.com is also going to help its sales partners. becoming more sustainable by offering a network of advisory and support parties. This should make it easier for Bol.com's 52,000 sales partners to quickly find good help in mapping their carbon footprint, reducing and offsetting emissions, and making their assortment more sustainable. And in terms of external validation of our programs, I'm proud that both Albert Heijn and Bol.com are taking this step towards B Corp certification. which is awarded to companies that meet high standards of corporate social responsibility. This work also extends to financial markets. In March, we successfully priced our inaugural green bond for 500 million euros. And with this, I nevertheless became the first corporate European borrower to issue three different ESG-related formats, confirming our ambition to set the pace in sustainable finance. The bond proceeds will be allocated towards projects contributing to our healthy and sustainable targets. As a final comment on the quarter, I would now like to give you some additional color on the recent announcement by the Deleuze management. On March 7th, Deleuze announced its future plan with the intention to affiliate all 128 existing owned supermarkets in Belgium in order to guarantee a sustainable future for Deleuze in Belgium. This intention is fully supported by Aho De Les and we acknowledge the team's courage to change course to ensure a viable and healthy underlying business for the long term. De Les has been one of the Belgium's favorite retail brands for over 150 years and four out of five Belgium consumers regularly shop at De Les. De Les is the leader for fresh, healthy, quality food with an emphasis on sustainability. The company has a large network of 764 locations in Belgium and is a pioneer in terms of digitalization, in particular with the SuperPlus digital customer loyalty program. Currently, there are already 636 independent affiliate Deleuze stores under the AD Deleuze, Proxy Deleuze and Shop & Go brand names. And as you all know, the Belgian market has been difficult for many years, overstored, highly competitive, and not very flexible. With the proposed change, Deleuze wants to reflect even more market trends, evolving consumer behavior and local presence. As such, its intention is to make the company future ready with an emphasis on local presence and entrepreneurship. by relying on a successful affiliate partnership model. This model is the only option for achieving renewed growth for these 128 supermarkets and also presents local entrepreneurs with a unique opportunity to join the last and develop the brand's future together with our experienced, skilled supermarket employees. Delhaize in Belgium will further continue to invest centrally in areas such as logistics, sourcing and marketing to provide optimum services to its network of stores. In terms of the process, following the announcement, we launched an information and consultation period in which we have had eight meetings so far with the union representatives. A next meeting is planned before the end of May. Discussions have not been easy. and there have been some actions in our supermarkets and distribution centers, the impact of which Nathalie will cover in her remarks. However, more and more supermarkets have been reopening in the past weeks. Today, all integrated supermarkets are open and serving again our customers. Sales are also gradually evolving back to a normal level. The Deleuze team remains committed to the social dialogue and on reassuring associates by repeating what they have promised from the start, offering the associates to keep the same wages and conditions according to their contracts after the transition. On that note, that concludes my comments on the first quarter 2023. Let me now hand over you to Natalie to talk more about the financials, and I will be back to discuss our outlook.