Ahold's full year results saved (somewhat) by Q4

Good fourth quarter in Low Countries

Ahold’s quarterly turnover in the Netherlands and Belgium reached 2.84 billion euro, up 4.5 % compared to 2013’s fourth quarter. On a year-to-year basis, its net turnover grew 1.8 % to 11.7 billion euro, partially thanks to the transformation of fifteen former C1000 stores and nine new Albert Heijn stores in Belgium.

Ahold Netherlands (including Albert Heijn in Belgium) saw its fourth quarter like-for-like turnover grow by 2.2 %: a decent boost for the retailer, as 2013’s fourth quarter turnover dropped 1 %. According to Albert Heijn, successful ad campaigns helped create turnover growth in December. One such campaign revolved around the company’s biological products.

Nevertheless, its fourth quarter did not manage to turn 2014 into a positive story. Although Albert Heijn performed well in Belgium, the like-for-like turnover in the Netherlands dropped 0.5 % compared to 2013. 2014 was the exact opposite of 2013 for Ahold Netherlands: that time the branch managed a 0.6 % like-for-like turnover increase for the full year, despite a weak fourth quarter.

And even the good fourth quarter of 2014 came at a cost: the huge price pressure pushed Ahold Netherlands’ operating income down 10 %, which means it has paid a huge price for its 2.2 % like-for-like turnover growth. Its full-year operating income dropped 7.3 % compared to last year.

US numbers: decent quarter, weak year

American net turnover (excluding fuel and at level exchange rates) grew 0.5 % in the fourth quarter. Ahold’s largest market, with 60 % of the company’s turnover, had a 0.3 % like-for-like turnover growth – much better than the 2 % drop of in 2013.

Just like in the Low Countries, its decent fourth quarter performance in the US did not salvage its full year, as Ahold USA’s yearly turnover dropped 0.6 %. Its like-for-like yearly turnover dropped 0.1 % while its operating income even dropped 7.9 %.

Simplicity is important for Ahold

Ahold’s total yearly turnover grew 0.5 % to 32.8 billion euro, because it managed to boost its flavourless fiscal year with a colourful fourth quarter. Positive exchange rate fluctuations have helped quarterly turnover grow 7.9 %, but excluding exchange rate fluctuations, Ahold’s quarterly turnover would only have grown 2.9 %.

Promotional pressure has also impacted the company as it forced operating income down 8 %. Its net result (excluding one-off book profits and debts) remained pretty much level, thanks to Ahold’s Simplicity program. The cost-saving program has helped save 865 million euro since 2012, while it has invested that money largely into lower consumer prices.

“We have created 865 millions’ worth of cost-saving and efficiency improvements, more than our goal of 600 million euro”, CEO Dick Boer said. “Ahold will forecast a new simplicity goal for 2015: we have to cut operational costs 350 million euro.”

Just like last year, Ahold will once again buy back its own shares this year. Last year, it bought back 2 billion euros’ worth of shares and this year, it will do so once more, for 500 million euro. It has also increased dividends 2.1 % per share.

More service and inspiration

Ahold’s share received a beating after the news was revealed, but all in all, the share is trading higher than it was three months ago. New formulas like Albert Heijn XL and the addition of AH to go modules in normal neighbourhood convenience stores in high-traffic locations seem to have assured Ahold’s future as a omnichannel retailer.

The company is also investing in its European and American online expertise. If its online sales keep growing, its like-for-like turnover growth will show if Ahold has managed to consumer interest with more service and inspiration…