Koninklijke Ahold Del Ord

Ladies and gentlemen, good morning and welcome to the analyst conference call on the fourth quarter and full year 2024 results of Aarhus Delhaize. Please note that this call is being webcast and recorded. During this call, Aarhus Delhaize 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 and other factors that are difficult to predict and that may cause our actual results to differ materially from future results expressed or implied by such forward-looking statements. Therefore you should not place undue reliance on any of these forward-looking statements. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of our Dalherza. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead, JP.

Thank you very much, Sharon, and good morning, everyone. I'm delighted to welcome you all to our 2024 Results Conference Call. On today's call, our friends, Muller, our President and CEO, and Yolanda Putz-Byle, 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, aholdelez.com. These will 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, that's two questions, not five-part questions, And 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. And with that, Frans, over to you.

Thank you very much, JP, and good morning, everyone. Reflecting on the year, I'm proud of all that we have accomplished. If I were to choose three words to summarize our year, it would be commitment, consistency, and clarity. Commitment is staying true to our values to deliver for our customers every day. And consistency is sticking to our plans, realizing another year of strong underlying performance. And clarity, being clear on where we are heading as a company through our growing together strategy. Commitment starts with our people. 2024 has been a dynamic and disruptive year with a lot of things to deal with, inflation, volatility in commodities and supply chain, social and political tensions, and fast-paced changes due to new technologies in how we work and how we live. Creating value for customers, catering to their local circumstances and specific needs, continues to be a tangible differentiator for our business. And for this, I would like to thank our passionate associates for living our values and their dedication to our performance-driven culture. Moving to consistency, this for me means sticking to our promises. In 2024, we said you could depend on us for four things. A relentless focus on the customer, our price positioning, and leveraging the strength of our great local brands. Continued advancement of our own brand strategies, increasing penetration and category depth. further simplification and modernization of our organization to sustain growth, and as always, continuing to be laser focused on cost control and cash flow to reinvest in our customers and our company. Looking at our scorecard, we were indeed consistent and achieved or exceeded all of our key goals for the year. At the same time, we also had the room to kickstart several growing together initiatives which will pave towards 2025. And finally, clarity, which is ultimately the key to great execution. In May and June, we crystallized our game plan and ambitions for the coming four years, building on our core strength and looking with an open mind to the future. We have an ambitious growth plan where we want to grow faster than the industry, maintaining leading margins, and deliver sustainable earnings growth. And I'm particularly proud of how quickly our teams have stepped into our new strategy, with several actions already well underway. Let me share a few highlights in this respect. First area is investing in our winning CVP, the customer value proposition. We want our customers to have vibrant experiences every time they interact with our brands, whether in-store or digitally. or at the intersection of the two. To that end, we are elevating our digital solutions and also adding some secret sauce through AI and predictive analytics. In the US, our brands delivered 12 billion personalized offers for the year, a one billion increase compared to 2023. And we also announced a new partnership with Inmar Intelligence on digital coupons, to further improve offer types and savings. At Alphabeta in Greece, the modular e-commerce platform was launched, the final in a series of six launches across the European market. At Albert in the Czech Republic, the first brand on the new app earlier, monthly app users have increased by over 20% and loyalty sales have increased nearly 10% compared to 2023. In tandem with our digital experiences, we also have been working hard on our assortment throughout the year, ensuring we offer the customer the freshest, healthiest products on the market at great competitive prices. In this respect, strengthening own brand assortment is key, and we have a big ambition to increase own brand penetration over time to 45%. Albert Heijn is a front runner in own brand execution. And in 2024, more than 150 own brand products and product lines were award winning in consumer taste and quality elections. Our CSE brands made progress on the product harmonization, bringing an additional 500 products, both price value and assortment differentiators to the range. These products also play a vital role in increasing regional price favorites, with all the CSE brands now having a minimum of 825 price favorites in their everyday assortment, which is an increase of 15% compared to 2023. In the U.S., a major focus has been on raising the awareness of own brand quality and price relatively to national brands. And during the last quarter, U.S. own brand sales growth outpaced the rest of the store in both dollars and units. The second next aspect I would like to highlight today is the progress we are making to densify and grow our markets. By prioritizing, optimizing, and sharpening our portfolio, you will see a more pronounced and rigorous focus on growing customer reach and extending leading positions in our most profitable markets. During our Strategy Day in May, JJ presented a clear view for the future potential of the U.S. brands in this respect. One of those is the Giant Company, which has a regional presence, local customer base, and leading market positions, which is why I'm pleased about the new store opening of the brand in Philadelphia in December, with two additional stores in the works for 2025. Additionally, 95% of the store fleet is now remodeled with the latest floor design. On the flip side, making necessary interventions when brands are challenged is an essential contributor to elevating the quality of our sales. The successful completion of the Belgium Future Plan affiliation project and the closure of the identified underperforming stop-and-shop locations demonstrated our company's ability to do so. And with these projects behind us, I will share next steps the teams are focused on a little bit later. Next, let's spend a moment on leveraging and lowering our cost base. In an environment where inflationary costs are a concern for many households, our brands remain proactive to ensure that essential items are affordable and within reach for every wallet size. This is fueled by our Save for Our Customers program, where we are proud that we exceeded our plans, generating over 1.35 billion euros in cost savings in 2024. And although we always can do better, two things we do really well in this respect are fact-based negotiations through our shoot cost models and simplification where we challenge ourselves to continuously improve and magnify best practices. Two good examples of simplification through collaboration from last year include for example in the US the team began streamlining the support brands into one out the last USA support organization supporting all of our five local brands in a consistent and cost-efficient manner in the CSE region the brands have completed the first phase of a project to standardize labor management allowing for optimized store execution additionally Commercial operations have been standardized across all the CSE brands, including one centralized data support team, consistent training across buyers, and aligned calendars for negotiations. This will also provide opportunities for PROFI to leverage as we unlock synergies in the coming years. Finally, let me spend a moment on healthy communities and planet. While the environment we operate in continues to evolve, our role and commitment to support healthy communities and planet is unchanged. These topics remain key for long-term business resilience, are a competitive advantage and align very closely with our values. Our brands continue to implement projects to promote healthy, affordable food, drive sustainable business practices like reducing food waste and energy consumption, and encourage diversity and inclusion in the workplace, reflecting and respecting the local communities in which we operate. One such example is Albert Heijn in the Netherlands. Its focus on healthy and sustainable products has contributed significantly to its growth in market share and customer loyalty. Their percentage of home-rent healthy food sales increased to close 200 basis points in 2024, while the organic range and the plant-based assortment, the brand AHA Albert Heijn Terra, are extremely popular. So in summary, as we leave 2024 behind, there are lots of positives to leverage and build upon in 2025. I will share a few of our plans for the year a little bit later, but now over to Jolanda, to share her remarks and insights in our numbers.

Thank you, Frans, and good morning to everyone. The great thing about being a grocery retailer is that we are constantly connected to our customers. The personal and digital connections we have with them, understanding their needs in real time, is a powerful asset when combined with the agility and entrepreneurial spirit of our great local brands. Through our steady and growing market shares, strong relative brand strength, we can see we are doing the right things as customers choose to shop with us every day. As Frans mentioned, we are very pleased with how we ended the year. Strong holiday sales thanks to festive assortments and shopping experiences that offered customers everything they needed to celebrate the season. On slide 18 and 19, we present the key underlying numbers for the quarter and the full year. To summarize, Net sales grew 0.6% to €23.3 billion during the quarter and 0.9% to €89.4 billion during the full year. Sales benefited from positive comparable sales ex-gas and store openings. The end of tobacco sales in the Netherlands, the closure of underperforming stop-and-shore locations and the divestment of FreshDirect impacted net sales growth dramatically. by 2.1 and 1.7 percentage points for Q4 and full year, respectively. Online sales increased by 5.8% in Q4 and 3.5% for the full year. The divestment of FreshDirect had a negative impact of 5.1 percentage points for the quarter and 6.9 percentage points for the full year. Excluding FreshDirect, we saw double-digit growth rates at many of our brands, including Albert Heijn and Food Lion. Underlying operating margin for the quarter was 4.1%, a decrease of 20 basis points versus last year, mainly due to lower non-recurring items in the U.S. related to holiday accruals. Our full-year underlying operating margin for 2024 was 4.0%. Diluted underlying earnings per share was 69 cents for the quarter and 2 euros 54 cents for the full year, in line with our guidance. Our operating income for the quarter was 607 million euro, representing an IFRS operating margin of 2.6%. IFRS results were 351 million euro lower than the underlying results. largely related to an amendment and additional funding of the Dutch pension plan. With this change, we have reduced our overall pension risk exposure and have eliminated the annual variability in the non-cash service charges. For the full year, our operating income was €2.8 billion, representing an IFRS operating margin of 3.1%, IFRS results were €824 million lower than the underlying results, largely due to costs associated with the following elements. The transition of stores as part of the Belgium Future Plan, the closure of stop-and-shop stores, and the amendment to and additional funding of the Dutch Pension Plan. Let's take a closer look at our Q4 performance, starting with revenues. Q4 comparable sales were 1.4%, which includes a negative net impact of 0.1 percentage points from weather and calendar shifts, and a negative impact of 1.1 percentage points from the end of tobacco sales in the Netherlands. US comparable sales shows a positive net impact from calendar and weather of 20 base points. In Europe, there was around 3.4 percentage points negative net impact from tobacco and calendar. Looking at the regional performance, US net sales were 13.9 billion euro. Comparable sales, excluding gas, increased 1.2%, excluding net weather and calendar impact, reflecting growing positive comparable sales momentum and a return to positive volumes during the fourth quarter. In addition to the calendar and weather impact, net sales were impacted by the following. Around 110 base points from the impact of stop and shop closures. Around 80 base points from the divestment of Fresh Direct. And around 25 base points from a decline in gasoline sales. Online sales growth of 10.9% adjusted for the impact of Fresh Direct was a key highlight of the quarter. Customers are responding positively to our partnership with DoorDash, where we continue to see an amount of orders accelerating, with a 20% increase in number of orders in Q4 compared to Q3. Underlying operating margin in the U.S. was 4.2%, in line with the third quarter. The margin performance year-over-year was impacted by lower non-recurring items, price investments at stop-and-shop, the net volume, unfavorable impact from a change in sales mix, and wage inflation. In Europe, fourth quarter trends were again strong. Net sales were 9.4 billion euros, up 2.4%, despite being negatively impacted by 2.8 percentage points from the end of tobacco sales in the Netherlands. Excluding the impact of tobacco and calendar shifts, comparable sales increased 4.7%, Like in the US, online sales growth was robust, increasing by 10.9%. Underlying operating margin in Europe was 4.4%, up 70 base points. This was mainly driven by strong performance, recovery in Belgium, and lower energy costs. We think it's important to appreciate the strong value creation, leading market positions, and opportunities being delivered by our European teams. Albert Heijn achieved its sixth consecutive year of strong growth, further expanding its market share to 37.7%, supported by an increase in number of customers and greater loyalty among existing customers. And Belgium continues its strong market share recovery following the transition of stores to the affiliate model, with an improved net promoter score, increase in number of customers, and market share at year-end well above pre-announcement levels. Finally, following a strong holiday period, Bull saw an acceleration in sales growth, achieved an all-time high in app users, and recognized its highest-ever quarter of sales. This, in combination with double-digit growth in advertising services and a relentless focus on cost management, drove the incremental increases in profitability with full-year underlying EBITDA growing to €185 million, up from €159 million. Part of Bull's competitive advantage is its best-in-market proposition, giving access to over 47,000 sales partners. An example is their flourishing collaboration with LIGO. In addition to compelling holiday campaigns, which drove a 25% increase in LIGO sales, Paul also introduced a pop-up Lego shop, which was a resounding success, with a second pop-up already planned for later this year in Belgium. Moving now to free cash flow. Q4 free cash flow was €1.3 billion, which represents an increase of €227 million compared to Q4 2023. Looking at the full year, we realized a free cash flow of over €2.5 billion, exceeding our guidance of the year. Our net capital expenditure for the year was below our original guidance in part due to timing as certain projects shifted to 2025, like our planned distribution center expansion for bull, slower store rollouts in CSE, and delaying some remodels in the US to calibrate more efficiently to our new strategy. With capital expenditure running slightly lower, the strength of our underlying operations allowed us to take the opportunity to optimize our future pension obligations in the Netherlands with additional funding to the Dutch pension plan of 105 million euro. To complete the picture on slide 27, you can see our net debt bridge year on year. Despite returning 2 billion euro to our shareholders, we were able to show a decline, mainly due to healthy free cash flow levels partially offset by the impact of foreign exchange rates on net debt. With these results, I'm pleased to announce our proposal to increase the dividend per share by 6.4% for 2024 to €1.17 per share. We've also initiated the €1 billion share-by-back program for 2025 on December 30 last year. Finally, let me provide some insights in our healthy community and planet's priorities. In 2024, the percentage of own-brand healthy food sales was 52.4%. This represents a step-up of almost one percentage point compared to 2023, if we exclude the negative impact of around 3.5 percentage points from the transition to NutriScore 2.0 for our Dutch and Belgian brands. Our total tons of food waste per food sales was 35% lower than our 2016 baseline. This is a similar result as in 2023. However, it includes a negative impact of 4 percentage points from improved data quality and measurements in the U.S. In Europe, performance improved, driven by closer collaboration with partners to increase food bank donations. We reduced our CO2 emissions in our own operations by 36% compared to our 2018 baseline, an improvement of 2% versus last year, driven by the installation of more sustainable refrigeration systems in the US stores and an increased use of green energy in Europe. For Virgin own brand plastic packaging, we can report a 10% reduction compared to 2021. which is equal to our reduction last year. Our brands were able to increase the percentage of recycled content and continued to implement initiatives to replace plastic packaging with paper or cardboard. As we move to our outlook for 2025, we have several levers at our disposal to navigate the environment. Using our growing together strategy and our growth model as a guide, you can count on us to keep a steady pace as we accelerate new store openings and remodels and prioritize and add to the scope of price investments. We will enrich our omnichannel capabilities, driving growth in customer loyalty and expanding our reach, and scale technologies that have a proven and successful track record. At the same time, we will also be focused on integrating Profi, our seven-themed great local brand, Here are some of the impacts to our 2025 financials you have to take into account. The integration will add around 3 billion euro in net sales. The dilutive impact to our European margin in the first year will be offset by improvements in the rest of the EU region. Taking net financial expenses into account, this will result in a net neutral impact to underlying EPS performance. And finally, Adding prophy impacts our capital expenditure by around €150 million, which includes maintenance capex, as well as plans to open around 100 new prophy stores. For our reported sales numbers in 2025, there are also a few other specific factors you want to reflect in your expectations. The stop-and-shop store closures are estimated to have an impact of between 550 and 575 million dollars. There will be around a 1 percentage point impact on reported and comparable store sales in Europe due to the end of tobacco sales at Albert Heijn's franchise locations in the Netherlands in the first half of the year, as well as due to the new regulations coming into force in Belgium from April 1st. Putting everything together, for our 2025 outlook, we expect an underlying margin of around 4%, a diluted underlying earnings per share growth of mid to high single digit, and a free cash flow of at least 2.2 billion euros, combined with a step-up in our gross capex to 2.7 billion euros. And as I said at Strategy Day, there's a lot to like about our plan for the coming years, including 2025. It's balanced. It's about growth, and it's about industry-leading margins and our cost discipline. We're investing in the future and in cash generation, resulting in growing shareholder returns. And we are not dependent on one element to drive value, since we have multiple levers to deal with volatility in economic, political, or social contexts. With that, let me hand back to Franz to give you a flavor of our priorities for this year.

Thank you very much, Yolanda. Much of our success over the past years comes down to doing the basics of good retail well, while at the same time innovating for the future. Customers are responding positively to our actions with increasing engagements with our apps and loyalty programs and more frequently becoming omnichannel shoppers and with a growing preference for our own brand products. So the art now is to continue to invest with this winning formula, sequencing our investments so that they build upon each other over time, and thus yielding compounding growth. For 2025, we'll be doing four key things. Accelerating new store openings and remodels, prioritizing adding to the scope of price investments, enriching our omnichannel capabilities, and therefore driving growth in customer loyalty, and scaling technologies that have a proven and successful track record. Our underlying operating margin guidance of around 4% and our gross capital expenditure plans of around 2.7 billion euro are reflective of this stance. We are ready to step up our branch organic store growth and remodeling program in the US. On top of the giant company stores, We expect to open an additional 10 stores this year, starting with the recent launch of a new food line in Proutman, North Carolina. We will also increase the pace of remodeling in the U.S., including the resumptions of remodels at Stop and Shop. In 2025, we will build on the good work of 24 and layer in the first rounds of the planned $1 billion price investments we outlined for the period 2025 to 2028. All brands will make price investments throughout the year, tailored to their local position and pricing strategies. In Europe, our teams in Central and Southeastern Europe will be focused on the integration of Profi. And with Profi, we add over 1,700 stores, and we will serve an additional 1.3 million customers on a daily basis. We will continue to invest decisively and will focus on our strategic priorities across the region, also to capture more opportunities from technology and sustainability. In Belgium, our teams will build on successful transformation by further evolving our omnichannel proposition. For example, by launching a new home shop center, putting e-commerce on the path to profitability. And we also recently announced, subject to regulatory approval, the planned acquisition of Delfood, which includes 325 points of sale. And with this acquisition, Deles will open new potential in the medium term in the fast-growing convenience space. In terms of scaling our technologies, we will roll out SAP S4 HANA to our European brands to establish one standardized global financial backbone and ramp up operations at our AD01 tech hub in Romania, which alongside our other data and tech teams will support the development of new digital data and tech capabilities. These examples demonstrate we have a clear plan for the year. We will continue to build scale where it makes sense and act local where we can make the difference. Our guidance for 2025 is consistent with our growing together ambitions, and we are fully committed to realizing the growth opportunities and value creation that is ahead of us. I'm pleased to say that we are off to a good start for the year, carrying the good momentum from the holiday season. And this gives us confidence for another good year for our brands, communities, and company. With that Sharon, please open the line 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 roster. Thank you. We will now go to our first question. One moment, please. And your first question comes from the line of Robert Jan Vos from ABN AMRO OdoBHF. Please go ahead.

Yes, hi, good morning all. Thanks for taking my questions. First one, concerning your comments on Profi and Europe, is it fair to assume that including Profi, you expect a roughly flat underlying EBIT margin of about 3.8% for Europe in 2025? That's my first question. And my second question, you started price investments at Stop and Shop, and this will continue in 2025. Can you elaborate a little bit on the first effects you've seen of those initial price investments? Thank you.

Yeah, thank you for your question, Robert-Jan. As you know, we don't give guidance on a regional level. And for the next year, we trend around 4%. And like I said at strategy, ultimately, we believe both regions are 4% plus regions. And I have to leave it at that.

And Robert John on price investment U.S. We communicated this growing together strategy with a CAGR of 4% for the total period, a sales CAGR. and an average 4% margin. And of course, you don't fall from a cliff in January to start with the plan. So you prepare already also in the US with price investment to already cater for growth. And therefore, maybe not a surprise, but it's good to know that we had positive volumes in the US in the fourth quarter. And the first period of the year was a very positive period to us. Also there, we saw growth in volume for the total U.S. And we also saw effects, positive effects with stop and shop brands where we invested in pricing, but also in proposition and customer value in private brands and these kind of things. So we are very happy with the momentum, how we came out of the fourth quarter for the total U.S. And we also can confirm that we see positive upticks for stop and shop in the start of the year with the price investments we already made and we'll make further also in the year. And let's not forget We said for the strategy period, we said 1 billion price investments of dollars for the U.S., and we will also, in the 2025 year, do those price investments across the total year for our U.S. brands.

Maybe to add to that, Frans, if you look at Stop & Shop, indeed, we started with Rhode Island, where we, at all the stores at Rhode Island, have reduced prices of almost 3,500 products. So I think customers will really experience it. And we are indeed happy that we ended with positive volume. So those price investments at large, it's not only stop and shop. We see that positive trend really paying out.

All right. Thank you.

Thank you. We will now take the next question. And the question comes from the line of Isabel Debreva from Morgan Stanley. Please go ahead.

Hello, good morning, and thank you for taking my questions. My first one is on Profibrom. So you gave us some disclosure for this year, but could you comment on the actual long-term plan for this business? So, for example, where do you see the steady-state margin for this business, those synergies, and what level of synergies do you have in mind? For example, is the business break-even today? It would be good to understand what do you have in mind on a multi-year view for this business beyond 2025, given the amount spent? And then my other question is just on the U.S. margin. So if we exclude the one-off, it was down 20, 30 bits, I guess, in Q4. So is this a realistic run rate of the level of decline that we can expect for the first half?

On the Profi question, and thank you for your questions, you have to repeat your last question for me, so I lost track there. But the Profi question that you asked, over time, we do expect Profi with the synergies that we can realize together, that Profi will trend in line with the European margins that we guide for, for the other brands as well. On a current operating profit level, they are profitable, but as you are probably aware, we intended to close the transaction last summer. It took a bit longer, so the synergies also take a bit longer. So in the next year, we are now preparing for those synergies, and they will drip in, but the real synergy payback will start in 2026.

Could you repeat your second question, please?

My second question was on the U.S. margin. If I look at the level of decline over Q4, excluding the one-offs, I guess it implies down 20, 30 basis points, which was in line with what you guided on the call last quarter. So I was wondering, is that the level of decline we should expect over the first half of the year before those price investments become annualized in the run rate?

Thank you for your question, and thank you for repeating it for us. As you know, and we're sorry for that, but we don't give guidance on regional level for our margins. So for the company as a whole, we will trend around 4%. But if you take out the one-offs, U.S. margin is expected to be stable.

Thank you. So stable sequentially for year-on-year.

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.

Hi, good morning. Thanks for taking the questions. Look, I think it's to kind of pick up on the US margin again. I think there's a lot of nervousness about that. I suppose when you think about FY25, does the U.S. margin need to go down before it goes back up? And I think I'm thinking about the commentary that you've made around the impact of price investments, the unfavorable mix of wage inflation impacting on margins. And I suppose the question is, why don't they repeat again throughout 2025? And then the second one is a bit of a bigger picture question. There's been changes at the FTC. There's been changes in the M&A environment in the U.S., Why don't you take advantage of that and merge with Kroger?

Thanks. Thank you for your advice, by the way. France will go into the suggested merger. If we look at the nervousness around the U.S. margin, I can understand that, but keep in the back of your head. We presented a growing together strategy where we stated that we are going to invest in prices over the period of our growing together strategy, so it's not a one-off in 2025. It's sequencing those investments to get the best return we can get. And if you look at the whole year at the U.S. level, although we do not give guidance on a regional level, the margin also in the U.S. will be rather stable for the full year as a whole because we're balancing our investments and the upsides we're creating.

And we talked about it earlier, I think, Yolanda, also in previous quarters, because sometimes we talk about The margins in Europe, we see them recovering now. We talked about the margins in the U.S. We have a business where both regions are 4% margin companies. And that's therefore also not a surprise that you see in our growing together strategy that 4% margin coming back again. And we have been always a 4% margin in the U.S. We don't want to change that. and we are recovering to a 4% margin in Europe, knowing that we had some deviations with the Belgian business. On your kind suggestion and recommendation on this otherwise boring Wednesday, maybe, you talked about Kroger. We always shared with you that we have an open view on expanding our business also inorganically when opportunities arise, which are in line with our strategy. And that's why you have seen Dell Foods, that's why you have seen Profi in Europe, which is in line with strategy, giving us more strength in market as well. And yeah, also like in the past, we open to opportunities inorganically. If those fit our strategy as such, we have a strong balance sheet, as you know, so we have the firepower in itself. But we come back to you if we have further ideas on M&A in total.

Thank you. Can I just clarify on the price investments, Yolanda, through the period of the growth, the strategy? I think you previously said that they would accelerate into the first half of 2025. Do you still see them accelerating into 2025 from 2024? Thanks.

Yes, there is an acceleration from 2024 into our growing together period. But the 1 billion that we talked about is a sequence over the full growing together period.

And in the 2025 years, it's also spread with brands through the year as well. Exactly. Thank you very much. You're welcome.

Thank you. Your next question comes from the line of Frederick Wild from Jefferies. Please go ahead.

Good morning, Franz, Yolanda, JP, and team. Thank you for taking my questions. Both of mine are really about just understanding the moving parts within the guidance. So first, on the around 4% margin guide, is that consistent with both ends of the mid-single digit to high single digit EPS growth range? And if so, where in the sales do you see the bands of that EPS guidance coming from? And secondly, a similar sort of question at free cash flow level. Is it right to think that if you deliver mid-single digit EPS growth, we should be looking at 2.2 billion of free cash flow, or is that an absolute limit? And where, if you deliver high single digit, do you think that free cash flow can get to? Thank you.

Okay. Thank you for your questions. Yes, the margin of rainfall is consistent to the mid to high single-digit earnings per share guidance that we're given. It's a combination of growth, share buybacks, and FX impact, which is favorable for the year at current rates. And at least 2.2, it is at least 2.2 billion of free cash flow that we are guiding on. So that's the floor, one could say.

You also gave a 9 billion free cash flow for the total strategy period, too. Yes. And we are at the beginning of the year, so we set at least 2.2 for 2025. It's... Striving for more, as always. It's the 12th of February. And let's not forget that we also gave you a 2.7 billion euro CapEx number for this year to take the necessary steps to modernize further our assets, to build stores, and to invest further in technology and data. So those things, of course, also fit together.

cost. Thank you very much.

Thank you. Your next question comes from the line of Francois Degas from Kepler Chauveur. Please go ahead.

Hello, good morning. Thank you to take my question. Could you come back on US volume recovery? Has it been through all your brands? And how does it compare to your perception of the underlying market? And my second question would be about private label in the US. Are you finding the right suppliers or are you shipping some dry or frozen products from Europe? Thank you.

So the second question was, do we find the right supplier base for our private brand strategies? Is that your question?

Exactly, in the U.S.

Yeah. So let me take it a little bit broader because we get quite a lot of questions on tariffs as well, huh? We are in food retail. We all have a very small number of ourselves in general merchandise to start with. Food retail is very local and although we import a few things from Asia and Europe, it's a relatively small share and it's very much a level playing field for the competitors we compete with. But it's a very local business, food. the tariffs will not most likely not have a heavy impact on us. Second thing was the element of price investments and therefore also volume growth. Yes, we see volume growth in all our brands in the U.S. And as indicated before, we intentionally did this because we would like to deliver on our first year of growing together, which is a growth strategy, as you know. And that's why we started in the fourth quarter already with our preparations. And we're also happy to see that also the start of the year, as I mentioned before, is a very good start on growth and on volume. And, yeah, that was our plan. That was our promise. We're growing to grow our business. And that 4% CAGR for a total strategy period is for us also, yeah, the target to deliver on.

Thank you very much.

Thank you. Your next question comes from the line of Ferdinand de Boer from De Graaf Petercam. Please go ahead.

Yes, good morning. It's Ferdinand de Boer from De Graaf Petercam. A couple of questions my side. I remain a little bit puzzled on the U.S. margins because you say we have a negative on-table impact from change in sales mix, but you closed down the stop-and-shop stores. You also had a large impact of uh... the fresh direct investment which i thought had a positive impact on markets so could you elaborate a little bit on that part and then coming back on the amendment for the netherlands you said home with eight million impact on your cash flow uh... what could be expected going forward because i thought the charts required bigger than that one and maybe to come back on the last question on europe uh... i thought you said in the call you assumed the dilutive impact of profit to be compensated by improvements in the rest of the business. So I still take that as a kind of 3.8% margin for 2024, or do we need to compare it with progress in Q4 of 23, for the 24?

So on the margin composition in the US, I understand your question for now. And indeed, we have not been maybe completely complete here. There are two elements which are also not helping our margin. First of all, our online sales growth. We grow double digit, which is strategy, and we are very proud about that number. And that is, of course, dilutive to our overall margin. And the second thing is we also grow in pharmacy. And you have heard that before with other players in the U.S., and that is also dilutive too. Yolanda, the other things?

Of course, and thank you for the questions, Ferdinand. The pension settlement in our unusuals for the quarter, there's 280 rounded for pension settlement, of which 205 is cash-related, and the remaining part is the balance sheet settlement. Of the 205 cash impacts, we paid already 105 in 2024. The remainder of the $100 million is spread over the period to come and factored in our guidance.

Okay, thank you.

Maybe the last question. Yes, like I said, I feel a bit repetitive, but we don't give that guidance. So it's up to you to conclude on a group level where we will deliver around 4%.

Okay, thank you.

You're welcome.

Thank you. Your next question comes from the line of Sridhar Mavakali from UBS. Please go ahead.

Hi, good morning, Franciella and JP. Thanks for taking my questions. There was a couple. Maybe, I think, Francie, you've referred to growing together strategy a couple of times in the Q&A. The 4% sales CAGR and an average 4% margin over the next four years. In that context, is 2025 a year of investing, i.e. potentially below 4% margin? Is that why you're calling out a round four to help you move towards the 4% sales CAGR beyond this year and then obviously get you back to at least 4% margin trajectory that you've enjoyed over the past few years? So that's the first one. Secondly, if I can just very briefly go back to helpful U.S. margin comments you've made. Within the year, is there some phasing for us to be thinking about in terms of particularly first half? Perhaps that's where some of us were trying to explore a bit more. So if you could just help a little bit, give us a little bit of an idea in terms of phasing, first half versus second half. Maybe very lastly, sorry to squeeze one more in, just in terms of run rate this year, I think Frans, you referred to a good start. Anything you can share in terms of current trading so far, perhaps versus Q4 run rate? Thank you.

Sridhar, it's good to hear you. Likewise. Likewise, but sometimes you ask us for almost weekly guidances of our results. But I appreciate the interest and the curiosity. on the total plan. Yes, a CAGR 4% growth. Yes, an average 4% margin. And we gave that guidance to have a little bit of flexibility over time because we would like to bring that growth. If you then break it down, what does that mean for 2025, then I think it's too early to share these kind of things. We just started the year. We started the year better than our 4% growth at the beginning of the year. So we have a good start in 2025. So that's why the teams also in the US and also in Europe are quite happy with that start. And let's not forget, I mentioned that before, you cannot think about your strategy on the 1st of January. We did that starting up and ramp up earlier. Also in Europe, if you take the tobacco sales out, we also grew in Europe in the fourth quarter 4.7% already. So that growth is coming. I mentioned volume growth in both regions. Yeah, and we work very hard to keep it like that. So let's see when we talk to each other in the first quarter how that developed in the beginning of this year.

But, Frida, we don't expect huge swings. We do things step by step. And like Fran said, we had the opportunity because we had it good. second half of last year to already trend towards a strategy. So we're phasing in and I don't expect big movements.

Thank you both.

Thank you. We will now take our final question for today. And the final question comes from the line of Maxime Straner from ING Bank. Please go ahead.

Hi. Good morning. Thank you for taking my question. Being the last, I'm going to focus on Europe instead of the U.S. Could you elaborate a bit on the building blocks for the improvement in margin in Q4, excluding gold? That was definitely a standout performer. But in terms of margin in the different countries, Europe, the Netherlands, and CEC, could you provide a bit of light on this as well, please? Thank you.

Thank you for the question and also for focusing on Europe because we are quite proud of how our European teams are indeed performing. The big swing in the European margin is coming from the Belgium future plan. I mean, we, of course, invested in the Belgium transition. The 128 stores are now affiliated. And, you know, they are outperforming the business cases we had and recovering market share significantly. faster than we had. We are now at a level of market share that is higher than before we started the plan. So you can really see that intervention, which was a heavy one, is paying out now, and that margins are trending faster than we expected towards the targets that we set. But also, of course, Albert Heijn had a tremendously well Q4. So over the line, very happy with European performance, and the Belgium future plan makes a difference.

And Jolande mentioned already a little bit the PROFI, and of course we got our closing of the project a little bit later than planned, like Jolande already mentioned. But it's very nice to see that the teams come very nicely together. There's a good integration process. Of course, we've got six months more time to prepare that, so we have super well-prepared teams who are now working on the synergies. I'm quite confident that this will be a great thing for our business in Romania. The complementarity of the business, 3 billion sales more. So I think Europe will show a good number. And to close off this last question, then I sound repetitive here, Londa, but our business in the U.S. is a 4% business. Our business in Europe is a 4% business, and you will see that number in Europe coming, and you won't see us losing that number in the U.S. So... Let's see. And thank you very much for your curiosity today and for your attendance to the call. And speak to you in the quarter one. That is not that far from now. We look forward. Thank you. Take care.

Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.