Operating and Financial Review and Prospects
58
Ahold Annual Report 2003
Operating and Financial Review and Prospects
expenses, as well as improved productivity at the store
level. These improvements in 2003 were partly offset by
higher rent, depreciation and employee benefits expenses.
2002
Net sales at Stop Shop increased by EUR 234 million,
or 2.4%, to EUR 10.0 billion in 2002 compared to
2001. Excluding the impact of currency exchange rates,
net sales would have increased by EUR 735 million, or
7.9%, in 2002 compared to 2001. Excluding the impact
of currency exchange rates, identical sales and
comparable sales would have increased by 2.3% and
3.4%, respectively, in 2002 compared to 2001. Net
sales increased and market share grew despite
weakened economic conditions and a highly competitive
retail environment. Net sales were positively affected by
the opening of 22 new and replacement stores during
2002. Additionally, net sales benefited from the full-year
consolidation of 36 Grand Union stores, which we
acquired in March 2001.
Operating income at Stop Shop increased by
EUR 134 million, or 21.4%, to EUR 760 million in 2002
compared to 2001. Excluding the impact of currency
exchange rates, operating income would have increased
by EUR 166 million, or 28.0%, in 2002 compared to
2001. As a percentage of net sales, operating income was
7.6% in 2002 compared to 6.4% in 2001. The increase
in operating income was due in part to net sales increase
that was greater than the operating expense increase as a
result of economies of scale, along with gross profit
improvements of 0.8%, as a percentage of net sales.
Operating expenses decreased, as a percentage of net
sales, due to efficiencies achieved from the integration of
the Edwards stores transferred from Giant-Carlisle and
consolidated into Stop Shop as of 2001 and the
integration of Grand Union stores, which we acquired in
March 2001. Previously, the Edwards division operated as
part of Giant-Carlisle but was strategically realigned to
operate under the management of Stop Shop.
Retail trade: Giant-Landover
2003
Net sales at Giant-Landover decreased by EUR 885
million, or 15.8%, to EUR 4.7 billion in 2003 compared
to 2002. Excluding the impact of currency exchange
rates, net sales would have increased by EUR 44
million, or 0.9%, in 2003 compared to 2002. This
increase was primarily caused by the opening in 2003
of nine new stores and one replacement store, along
with the full-year net sales impact of eight new and
replacement stores opened during 2002. Excluding the
impact of currency exchange rates, identical sales would
have declined by 1.9%, and comparable sales would
have declined by 1.1%, in 2003 compared to 2002,
reflecting our continued struggle with intense
competition and increased competition from alternative
formats in the trade area.
Operating income at Giant-Landover decreased by
EUR 137 million, or 33.7%, to EUR 270 million in 2003
compared to 2002. Excluding the impact of currency
exchange rates, operating income would have
decreased by EUR 71 million, or 20.8%, in 2003
compared to 2002. As a percentage of net sales,
operating income was 5.7% in 2003 compared to 7.3%
in 2002. This decrease was primarily caused by a
decline in gross profit of EUR 31 million, or 0.9%, as a
percentage of net sales, and an increase in wages of
EUR 24 million, excluding the impact of currency
exchange rates. The decline in gross profit was due to
increased promotional activity and reduced prices in
response to competition. Wages increased as a result of
renegotiations of union contracts in 2003, along with an
increase in the costs of pension and medical benefits.
2002
Giant-Landover net sales decreased by EUR 100 million,
or 1.8%, to EUR 5.6 billion in 2002 compared to 2001.
Excluding the impact of currency exchange rates, net
sales would have increased by EUR 185 million, or
3.4%, in 2002 compared to 2001. Excluding the impact
of currency exchange rates, identical sales and
comparable sales would have increased by 2.7% and
3.2%, respectively, in 2002 compared to 2001. Net
sales were positively impacted by the opening of eight
new and replacement stores during 2002. However, as
discussed above, net sales were negatively affected by
the weakened economy in the U.S., along with
increased competition within the Giant-Landover trading
area, particularly from the new store growth of traditional
supermarket competitors.
Operating income at Giant-Landover increased by
EUR 25 million, or 6.5%, to EUR 407 million, in 2002
compared to 2001. Excluding the impact of currency
exchange rates, operating income would have increased
by EUR 45 million, or 12.4%, in 2002 compared to
2001. As a percentage of net sales, operating income
was 7.2% in 2002 compared to 6.7% in 2001.
Operating income increased in 2002, in spite of a
decline in net sales, mainly as a result of a slight
improvement in gross profit margin of 0.5% due to
Giant-Landover selling a more profitable mix of products
and benefiting from an increase in vendor allowances
for promotional activity.
