Letter to our shareholders
DEAR SHAREHOLDER,
I am delighted to welcome you to our Annual Report 2005. In the pages that follow,
we set out Ahold's progress over the past year, share with you our strategy for the
future, and highlight the achievements of our 247,000 employees around the world.
The achievements we present in this report are a testament
to our colleagues taking concepts that might sound abstract
- "delighting customers" or "easy in, easy shop, easy out" -
and bringing them to life in their daily work. With a business
spanning 3,455 stores and 126 foodservice outlets across
the United States and Europe, we are proud of the fact that
our customers experience high standards of service all day,
every day of the year.
Many readers will be aware that in 2005 we completed the
majority of our Road to Recovery strategy, including the
EUR 3.1 billion divestment program and our significant
reduction in net debt. We are a much healthier company
today as a result. In January 2006, we welcomed John
Rishton as our new Chief Financial Officer.
We had a number of other accomplishments in 2005. You
can read more about our achievements and future strategy
in the following sections, but I would like to point out a few
notable developments here.
A significant milestone for us was the USD 1.1 billion
(EUR 929 million) settlement of the securities class action
brought against Ahold in 2003, subject to court approval.
It is the last of our outstanding material litigations with
significant financial exposure from that time.
We unveiled in November 2005 a new long-term strategy for
U.S. Foodservice. The strategy splits U.S. Foodservice into
two operating companies, Broadline and Multi-Unit,
enabling the business to serve the needs of its very different
customer types more effectively.
experience strong competitive pressures in our retail
operations, with considerable challenges at the Stop Shop/
Giant-Landover arena. Tops, in particular in northeast Ohio,
and the Central Europe Arena continue to underperform.
The financial targets we originally set for retail in 2003 have
become increasingly challenging. Competitive and operating
cost pressures have been greater than expected and the
turnaround at certain businesses has been slower than
planned. Based on the retail trends we have seen for the
year to date, we expect our retail net sales growth this year
to be between 2.5% and 3.0% (at constant exchange rates,
and excluding divestments made in 2005). In addition,
we expect that our retail operating margin will be between
4.0% and 4.5% in 2006. Our overall priority remains to
drive top line growth and achieve a 5% retail operating
margin. U.S. Foodservice targets remain unchanged.
The achievements of 2005 are now enabling us to focus
fully on managing our business for the future. In 2006,
our focus will be on operational and value improvement,
a comprehensive review of underperforming assets, and
a reduction of corporate overhead. Our market leadership
positions and restored financial health will help us to
accelerate the implementation of our strategy.
Our journey continues. I am confident that our businesses
have both the determination and the skills to achieve our
goals in doing what is right for the customer and increasing
shareholder value. I believe that our strategy, our market
leadership positions, and the commitment of our employees
are what sets Ahold apart and makes it a company in which
we are all proud to invest.
During the year, our successful value repositioning at
Albert Heijn and ICA further improved our market share and
growth. Our Stop Shop/Giant-Landover arena is launching
its own value improvement program in 2006. We expect
this, together with store reinvestment and cost reduction
initiatives already underway, will steadily enhance our
market position in the coming years.
Nevertheless, 2005 has been a difficult year with mixed
performance in our key business arenas. We continue to
On behalf of the Corporate Executive Board, I extend to you
my best wishes.
Anders C. Moberg
President Chief Executive Officer
Amsterdam, the Netherlands, March 28, 2006
AHOLD ANNUAL REPORT 2005
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