00 Ahold ANNUAL REPORT 2002 55
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
Operating loss in European retail trade operations in fiscal 2002 was EUR 640 million compared to operating income
of EUR 288 million in fiscal 2001. Gross profit remained almost at the same level due to, on the one hand, centralized
purchasing in Europe and, on the other hand, an increase in promotional activities. Operating expenses increased
significantly compared to fiscal 2001. Operating expenses were most significantly affected by goodwill impairment charges
of EUR 882 million relating to Ahold Supermercados in Spain, as well as impairment charges totaling EUR 67 million
related mostly to other long-lived asset impairments in the Czech Republic, Poland and Spain. The significant impairment
write-down at Ahold Supermercados in Spain was caused by economic conditions, in combination with our difficulties in
integrating this acquisition.
- Fiscal 2001
Net sales in European retail trade operations increased by EUR 2.7 billion, or 29.2%, to EUR 12.1 billion in fiscal 2001
compared to fiscal 2000. The increase in net sales in fiscal 2001 was largely due to the full-year consolidation of
Superdiplo, which we acquired in December 2000. Excluding the acquisition of Superdiplo, net sales improved within all
trading areas in Europe, particularly within Poland and the Czech Republic, due to the opening of new stores, as well as
identical sales growth at Albert Heijn. At Schuitema, which operates in The Netherlands, net sales increased significantly
due to the full-year consolidation of the A&P stores, which Schuitema acquired in September 2000.
Operating income decreased by EUR 8 million, or 2.7%, to EUR 288 million in fiscal 2001, compared to fiscal 2000.
As a percentage of net sales, operating income decreased from 3.2% in fiscal 2000 to 2.4% in fiscal 2001. The decrease
in operating income was primarily the result of restructuring charges of EUR 21 million relating to the integration of the
former A&P stores.
Retail trade: Albert Heijn
We pioneered the supermarket concept in The Netherlands and, as of the end of fiscal 2002, we were the leading Dutch
food retailer through our Albert Heijn brand, both in terms of retail sales and store count. As of the end of fiscal 2002,
Albert Heijn operated 706 stores, including 217 franchise stores, with an average sales area of 6,291 square feet.
Albert Heijn also operates distribution centers for grocery products and a number of processing and other distribution
facilities for produce.
The franchise stores typically operate in smaller market areas under the Albert Heijn format and are not distinguishable
from company-owned stores. For each franchise store, Albert Heijn provides:
- merchandise at wholesale prices, including a franchise fee;
- various support services, including logistical and warehouse services; and
- management support and training, marketing support and administrative and financial assistance.
Franchise agreements typically have a term of five years, and are renewable for additional five-year terms. Franchise stores
are primarily smaller stores, with an average sales area of 2,170 square feet.
In fiscal 2002, Albert Heijn opened two Albert Heijn XL stores, a new extra-large store format in the Dutch market, which
is approximately three times the size of a conventional Albert Heijn supermarket. Albert Heijn also introduced "AH to go,"
a new convenience store format in shopping streets, gas stations, hospitals and railway stations. Ranging in size from
1,000 to 2,500 square feet, AH to go stores offer a select range of food and beverage products for immediate or home
consumption. Albert Heijn opened 20 AH to go stores in fiscal 2002 and currently has 33 such stores.
- Fiscal 2002
Net sales at Albert Heijn increased by EUR 294 million, or 5.4%, to EUR 5.7 billion, in fiscal 2002 compared to fiscal
2001. The increase in net sales in fiscal 2002 was mainly due to inflation, along with the opening of two Albert Heijn XL
extra-large stores and 20 "AH to go" convenience stores which were new formats we introduced in fiscal 2002. For fiscal
2002, identical sales growth at Albert Heijn was 4.5% compared to fiscal 2001, an increase caused by higher net sales
per customer.
Operating income at Albert Heijn increased by EUR 15 million, or 6.1%, to EUR 262 million in fiscal 2002 compared to
fiscal 2001. As a percentage of net sales, operating income remained constant at 4.6%. Gross profit margin improved
slightly due to the positive effect of inflation resulting from the introduction of Euro notes and coins. Operating income
was negatively affected by an increase in operating expenses, in large part because of increased pension plan costs.
