Ahold Expects Challenging 2011 Food Retail Environment
In the fourth quarter, customers continued to focus on value, driving intense promotional activity, particularly in the United States. Operating margins were negatively impacted by cost inflation that was not fully passed on to customers.
3/3/2011 --- Ahold has published its summary report for the fourth quarter and full year 2010. CEO Dick Boer said: "In 2010, Ahold delivered another solid performance in both the United States and Europe. Despite another challenging year for the food retail industry, we managed to successfully increase volumes and grow market share in each of our major markets.
"For the full year, sales grew by 4.4 percent at constant exchange rates and after adjusting for the impact of an additional week in 2009. We reported an underlying retail operating margin of 4.9 percent; excluding the Ukrop's stores we acquired in 2010, the underlying retail margin was 5.1 percent, the same as in 2009."
"In the fourth quarter, customers continued to focus on value, driving intense promotional activity, particularly in the United States. Operating margins were negatively impacted by cost inflation that was not fully passed on to customers. We increased volumes and improved market share in the Netherlands, the Czech Republic and in the United States.
"We expect 2011 to remain challenging for the food retail industry. Although there are signs of a gradual economic recovery, we expect consumers to remain focused on value and cautious in their spending in an inflationary environment. We will continue to reduce costs so that we can invest in our offering to improve the value we provide, while managing the balance between sales and margin.
"Reflecting the confidence we have in our strategy and our ability to generate cash, we propose a 26 percent increase in our dividend to €0.29 per common share. Our strong balance sheet enables us to launch a new €1 billion share buyback program for the next 18 months while continuing to actively pursue our growth strategy and taking advantage of opportunities as they arise.
"We reiterate our mid-term targets to achieve a net sales growth of 5 percent (mainly from identical sales growth) and an underlying retail operating margin of 5 percent, while maintaining an investment grade credit rating."
At current exchange rates, Ahold expects its net interest expense for 2011 to be in the range of €230 million to €250 million and its capital expenditure to be around €0.9 billion.
