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At Ahold’s annual general meeting of shareholders yesterday in Amsterdam, CEO John Rishton discussed what he proudly termed the retail conglomerate’s “solid results in absolute terms and excellent results in relative terms” over the past year, adding, “Overall, I am pleased with our performance.”
“It was a tough year for the industry,” explained Rishton. “It was a year of recession in all of our markets, a year when unemployment increased, consumer confidence fell, we saw customers trading down and, for the first time in years, we saw food deflation. As a consequence, the intensity of the competitive environment increased substantially.”
However, he noted, the company was still able to grow sales by 6 percent at constant exchange rates; boost income from continuing operations by 9.6 percent; deliver an underlying retail operating margin of 5.1 percent; improve operating cash flow and return on capital; achieved higher customer satisfaction ratings at its U.S. banners; increase market share at Giant-Carlisle, Giant-Landover and Stop & Shop; and drive volume increases in all of its operations, among other feats.
In the United States, Stop & Shop and Giant-Landover’s market share grew, margins improved, and identical sales volume and customer trips increased, Rishton said. He added that customer scores for price, quality and overall satisfaction improved and the company introduced a value program with new loyalty cards. Further, as part of its three-year store refresh program, Giant-Landover remodeled 34 more stores, taking its two-year total to 66. The results for these stores helped Giant-Landover improve gross margins, grow share and achieve the highest identical sales of Ahold’s three U.S. banners, according to Rishton.
Meanwhile, Giant-Carlisle’s margins fell, a situation Rishton attributed “the competitive environment and higher costs.” However, he noted that the banner boosted identical sales volumes, bettered customer satisfaction and grew market share.
Additionally, “For all three banners, we have stepped up our customer insight initiatives and hired an external agency to help improve our analysis and understanding of customer behavior, said Rishton.
Across the entire business, Ahold made “a major change to our organization last year as the next step in becoming more customer-focused while simplifying the business to improve efficiency,” he observed. “For the first time, the structures in Europe and the United States now reflect each other.”
For the near future, although, like many other chief executives, Rishton didn’t anticipate “any significant improvement in the short term in the economic environment,” he said he hoped to see conditions improve through the year. He added that the company planned to increase its capital expenditure by about 40 percent, including more remodels at Stop & Shop and Giant-Carlisle, and the completion of the program to renovate 100 Giant-Landover stores.
He also mentioned that the company had “a cross-continental/cross-functional group of senior executives examining the convenience market and opportunities for smaller-format stores” in the U.S. market. Moreover, on the heels of launching nearly 1,000 private label products in U.S. stores, Ahold would “continue to improve and expand our private label offering” in 2010, according to Rishton.
In talking about the expansion of U.S. markets through the purchase of the Ukrop’s chain in Virginia and five Connecticut Shaw’s stores, Rishton noted that while the acquisitions “in themselves are small, they are a good indication of the opportunities available in the current environment, and they are also evidence of a shift to a new phase for Ahold and our intent to grow both in new and existing markets.”
Referencing the company’s mid-term annual target for growth of 5 percent, Rishton said, “[W]e will achieve this and more, based on the business we have today.”
In sum, the head of Ahold is looking resolutely ahead, despite a lagging economy. “We are confident about the future, and about our ability to grow profitably and satisfy our customer,” he observed.