We remain
focused on our
business model,
lowering our
cost base and
reinvesting the
savings to
improve our
customer
proposition.
lr"
s
Group financial review
27
3.6%
Ahold at a glance
Business review
Governance
The food retail sector has been undergoing major
changes, turning a strong focus to Fresh, convenience
and omni-channel. These developments are taking
place in an environment that continues to be highly
competitive, with customers remaining value-oriented
and focused on price and promotion in all of
our markets.
Under these market conditions, our strategic promise
to be a better place to shop is helping us focus on
the right priorities by improving quality, service and
value for our customers while developing our formats
and accelerating our online business.
Our continuous efforts have started to bear fruit, with
sales trends stronger in the second half of the year.
However, cautious consumer spending kept volume
growth under pressure and, combined with our
investments in price improvements and low inflation,
resulted in modest sales growth. Net sales in 2014
were €32.8 billion, up 0.5% compared to 2013.
At constant exchange rates, net sales grew 0.8%.
Our net sales increased primarily due to new store
openings, including the acquisition of 49 SPAR stores
in the Czech Republic and the impact from 15 stores
in the Netherlands that were converted in 2014 as
part of the agreement to transfer 82 stores from Jumbo.
In addition, we continued remodeling and expanding
our stores. Identical sales growth was negative in
all three segments. Both our grocery and general
merchandise online businesses continued to grow by
double-digits. Our online businesses contributed 3.9%
to Ahold's net sales in 2014 (2013: 3.3%).
Tight cost management remains a core part of our
business model. By the end of 2014, we exceeded
our three-year (2012-2014) €600 million cost
savings program, having delivered €865 million.
This enabled us to continue to invest in our
competitive position and, at the same time, our
businesses benefited from optimized store processes
and improved sourcing. In Europe, as part of our
Simplicity program, we implemented a reorganization
of our head office support roles to improve efficiency.
In addition, we streamlined Albert Heijn's commercial
organization to enable a greater focus on improving
quality and value for our customers and to successfully
introduce new products, especially in Fresh.
Ongoing initiatives from our Simplicity program,
which will be re-invested in our customer proposition,
are expected to deliver €350 million of cost savings
in 2015.
Ahold
Annual Report 2014
Despite a successful savings program in 2014, our
underlying operating margin was 3.9%, down from
4.2% in 2013, primarily due to investments in value
and growth in our main markets and deleverage of
fixed costs resulting from soft sales trends.
Underlying operating income (which excludes
impairments, gains on the sale of assets,
restructuring and related charges, and other
unusual items listed below) was €1,267 million in
2014, down €112 million or 8.1% (down 8.0% at
constant exchange rates). Operating income was
€1,250 million, up €11 million or 0.9% compared
to 2013.
We remain committed to maintaining a balance
between investing in profitable growth, returning cash
to our shareholders, and reviewing opportunities for
debt reduction. In 2014, we returned €2.7 billion
cash to shareholders through the completion of our
€2 billion share buyback program, €1 billion capital
reduction and reverse stock split, and a 7% increase
in our dividend. This helped us to move toward our
capital structure guidelines for liquidity (€2 billion) and
debt leverage (ratio of around 2 times).
During the year, we entered into a settlement
agreement and paid $297 million (€241 million) to
resolve a class action relating to the pricing practices
of Ahold's former subsidiary U.S. Foodservice
(referred to as "Waterbury litigation" in Note 34 of
the Financial statements in this Annual Report),
Consistent strong cash Row generation has enabled
our continued investment in growth, with capital
expenditure of €1 billion during the year including the
acquisition of the SPAR business.
We will continue to look for ways to simplify our
business in order to reduce costs and expect that
ongoing investments in our customer proposition and
further development of our formats and assortment
will result in improved sales trends.
Net sales
million
32,682
32,615
32,774
29,353
30,098
u
4.6%
5.5%
2.0%
0.8%
2010 2011 2012 2013 2014
Net sales
- Net sales growth at constant exchange rates
Online sales
million
1.26/
1,086
830
3.9%
1 1.5%
2.5%
2010 2011 2012* 2013 2014
Online sales
Contribution to Ahold's net sales
During 2012 Ahold acquired bol.com
Underlying operating income
million
1,376
J
1,377
1,412
1,379
1,267
4.7%
4.6%
4.3%
4.2%
3.9%
2010 2011 2012 2013 2014
Underlying operating income
Underlying operating margin