New strategic direction
Tough operating year, results impacted by restatements
2003 Outlook
Under the direction of this renewed Corporate Executive Board, we are embarking on a new strategy, with two key priorities.
The first is to be a leading food retailer based on net sales in selected markets in the United States and Europe, focusing on
trade areas where we already have achieved, or believe we can achieve, such a leading position within a reasonable period of
time. The second is to rebuild U.S. Foodservice to restore its value following the events announced in February 2003 and
subsequently. We will determine the future role of U.S. Foodservice within the strategy of Ahold when we have a clear
picture of the value of this business.
We are making a fundamental change in the organization: instilling a true focus on the business and the customer into
everything we do as the holding company. We will need to step up our efforts to lower our cost base and to maintain local
market leadership, by simplifying the organization, standardizing our distinct customer offering and moving toward a "one
company approach" in which common processes are driven throughout the business. This will allow us to deliver our
unique standard of quality to our customers, at better value.
Our consolidated net sales were EUR 62.7 billion in fiscal 2002 compared to EUR 54.2 billion in fiscal 2001, an
increase of EUR 8.5 billion, or 15.6%, in fiscal 2002 compared to fiscal 2001.
Currency exchange rates negatively affected our net sales in fiscal 2002. Excluding the impact of currency exchange rates,
net sales would have increased by EUR 10.8 billion, or 20.8%, in fiscal 2002.The increase in net sales was largely
attributable to acquisitions, primarily including the full-year consolidation of Bruno's, in the U.S. retail trade segment, and
Alliant, in the U.S. food service segment. In addition, the results of Ahold's subsidiaries Disco and Santa Isabel in South
America were consolidated in the course of 2002.
Excluding these acquisitions, net sales in fiscal 2002 increased primarily as a result of net sales growth in retail trade at
Stop Shop, Giant-Carlisle and Albert Heijn, which was caused by a variety of factors, including, in particular, the
opening of new stores, an increase in customer promotions and, in the case of Albert Heijn, inflation within Europe.
Our operating income was EUR 239 million in fiscal 2002 compared to EUR 1.9 billion in fiscal 2001, a decrease of
EUR 1.7 billion, or 87.5%. In fiscal 2002, our operating results were significantly impacted by impairment charges
relating to goodwill and other intangible assets of EUR 1.3 billion, impairment charges relating to other long-lived assets
of EUR 137 million, and the exceptional loss of EUR 372 million relating to the default by Velox Retail Holdings on debt
that we had guaranteed.
Operating income in fiscal 2002 also was negatively affected by currency exchange rate differences, particularly as a
result of the lower exchange rate of the US dollar to the Euro.
The full operating review can be found on pages 22 through 85.
In fiscal 2003, we expect that our consolidated net sales compared to fiscal 2002 will be negatively affected by the
weakened global economy and strong competition in the markets that we serve, as well as the diversion of our management
as a result of the events surrounding the announcements on February 24, 2003 and subsequently, and the related
investigations. In addition, our fiscal 2003 net sales will be negatively affected by our completed and future divestments.
We expect that operating expenses, excluding the impact of currency exchange rates, will be significantly higher in fiscal
2003 than our operating expenses in fiscal 2002 (excluding the impact of the impairment of goodwill charges taken in
fiscal 2002 and the exceptional loss in fiscal 2002) and that, as a result, we will experience an adverse impact on our
consolidated operating income in fiscal 2003. In addition, we expect that net financial expenses, excluding the impact
of currency exchange rates, will increase above fiscal 2002 levels. We anticipate that these increases in expenses will
adversely affect net income.
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