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    Ahold Racks Up Q4, FY 2012 Gains

    U.S. banners benefited from strong promos, good holiday sales

    Ahold has posted net sales for the fourth quarter of 2012 of 7.8 billion euros (USD $10.7 billion), up 7.5 percent and 5.1 percent at actual and constant exchange rates, respectively. During the quarter, the company’s Ahold USA division achieved 4.3 percent sales growth, while its holdings in The Netherlands achieved 7.7 percent growth. Combined sales in the Czech Republic and Slovakia fell 3 percent at constant exchange rates. Underlying operating income was 355 million euros (USD $465.1 million), up 4.1 percent and 2.7 percent at actual and constant exchange rates, respectively. Underlying operating margin was 4.5 percent, compared with 4.7 percent last year.

    Ahold had been implementing a suite of retail applications in both the United States and Europe, but following a review of its systems development strategy, the Amsterdam-based retail conglomerate has decided to focus on the development of the retail suite in Europe, where Ahold has already successfully implemented several elements. In the United States, the company plans to focus on areas it believes likely to provide the greatest benefits, including customer loyalty, point of sale and e-commerce. Accordingly, Ahold has written down $116 million of capitalized software development costs in the fourth quarter as a restructuring charge in the United States.

    As a result, operating income was 156 million euros (USD $204.4 million), a decline of 172 million euros (USD $225.5 million), or 53.3 percent at constant exchange rates. Net income was 158 million euros (USD $207.0 million), down 112 million euros (USD $146.7 million). The loss from discontinued operations related to past divestments was 1 million euros (USD $1.3 million), versus 4 million euros (USD $5.2 million) in the year-ago period.

    For the full year 2012, net sales were 32.8 billion euros (USD $42.9 million), up 8.5 percent and 3.5 percent at actual and constant exchange rates, respectively. Underlying operating income was 1,414 million euros (USD $1.9 billion), up 2.8 percent at actual exchange rates, but down 1.3 percent at constant exchange rates. Underlying operating margin was 4.3 percent, compared with 4.5 percent in 2011. Net income for 2012 was 827 million euros (USD $1.08 billion), a 190 million-euro (USD $248.7-million) decline. The loss from discontinued operations was 3 million euros (USD $3.9 million), compared with 15 million euros (USD $19.6 million) last year.

    “In 2012, we began to reap the benefits of the ‘Reshaping Retail’ strategy, actively leveraging changing consumer needs and pursuing growth opportunities, in both existing and new markets,” noted Ahold CEO Dick Boer. “We delivered another year of solid financial performance. … We are pleased with our market share gains in an ongoing intensely competitive environment in all our major markets.”

    Added Boer: “During the year, customers were focused on price and promotions, without compromising on quality. In response, we were able to simplify our business and save costs so that we could invest more into offering great value to our customers.”

    At Ahold USA, fourth-quarter net sales were $6.1 billion, a 4.3 percent increase. Identical sales were up 2.4 percent (1.4 percent excluding gas). “These increases were partly driven by the exceptional efforts of our teams during Hurricane Sandy, which enabled our stores to remain open and to serve our customers during these difficult times,” Ahold said. “We achieved market share gains in both the supermarket and all-outlets channel as sales benefited from our strong promotional activities and a good holiday performance.”

    Underlying operating margin was 4.2 percent, versus 4.1 percent last year, and included a benefit of $26 million related to Ahold’s portion of a settlement of litigation with Visa and MasterCard.

    For the full year, net sales were $25.8 billion, a 3.1 percent increase, while identical sales grew 1.4 percent (0.5 percent excluding gas). Ahold USA’s underlying operating margin was 4.1 percent, compared to 4.3 percent last year, because of pressure on gross-profit margins, with cost savings providing a partial offset.

    “Our U.S. businesses are improving their own-brand product lines to give customers more choices at different price points to fit their budgets,” said Boer. “We are building our online business on both continents to give customers more shopping alternatives, and we continued to achieve double-digit online sales growth in food. … Customers appreciate the convenience of the pickup points we opened during the year, including the first Peapod pickup points in the United States.”

    Boer also noted that Ahold USA had “expanded our geographic reach during the year, by acquiring and converting 15 Genuardi’s stores to the Giant-Carlisle banner in the Philadelphia area in the United States.” Ahold has declared itself “satisfied” with the acquired stores’ integration and performance.

    As for the near future, Boer said that Ahold would “remain cautious in our outlook for 2013, but, similar to 2012, we are committed to deliver on our Reshaping Retail strategy. We will stay focused on simplifying our business to reduce costs so that we can continue to improve our offering and the value we provide to our customers. We are committed to invest in growth while maintaining a return on capital employed in the top quartile of the sector. We believe our businesses are well positioned for the future and are committed to offering our customers a better shopping experience in our stores and online every day.”

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