On March 1, Ahold announced that its net income rose 75.3 percent to 270 million euro ($360 million) in its fourth quarter ended December 31. Quarterly sales increased 4.5 percent to 7.29 billion euro ($9.71 billion) for the Amsterdam based retailer.
Commenting on the company’s fourth quarter and year-end results chief executive Dick Boer said, “We are pleased with our performance in the fourth quarter, delivering solid results in the United States and the Netherlands. 2011 was a successful year for Ahold where we grew sales by 5.5 percent at constant exchange rates and net income by 19 percent (for the full year) under challenging economic circumstances. We launched our new strategy to reshape retail at Ahold, taking advantage of rapid changes in consumer behavior, shopping trends and the retail landscape. We achieved our cost reduction targets a year ahead of time and announced a new 350 million euro ($466 million) cost savings program for the next three years. Reflecting the confidence in our new strategy and our proven ability to generate cash, we propose a 38 percent increase in our dividend to euro 40 ($0.53) per share.”
The Northeast’s largest supermarket operator also posted very solid earnings and sales results at its four U.S operating banners in its fourth quarter.
For the fourth quarter, operating income at AholdUSAwas $225 million (3.8 percent of net sales), up $45 million. Operating income included $16 million of impairment charges. Last year, impairment charges were $26 million, and an additional $12 million provision for restructuring and related activities, and a $3 million gain on the sale of assets. Operating income last year also included $8 million of reorganization and IT integration costs. Net sales were $5.9 billion, up 5.0 percent. Identical sales were up 3.9 percent (2.9 percent excluding gasoline).
For the full year, net sales were $25.1 billion, up 6.6 percent. Identical sales were up 4.9 percent (2.9 percent excluding gasoline). Operating income was $1.0 billion (or 4.1 percent of net sales), up $80 million.
Despite the strong fourth period, Boer cautioned shareholders about economic and competitive concerns going forward.
“We expect 2012 to be another challenging year for the food retail industry, the macro-economic environment means that consumers still continue to look for value and competition will remain intense. Our strong brands are well positioned to make progress in our major markets, however, we anticipate sales growth in the first quarter will reflect the difficult economic conditions, as well as the timing of Easter.
“During 2012, we will take further steps to make our capital structure more efficient by investing in growth, reducing debt and returning cash to shareholders while remaining committed to an investment grade credit rating.”
At the follow-up financial analysts conference call, Boer continued his cautionary tone: “We clearly have seen that there is slower growth of the first couple of weeks in the markets we are in,” noting economic conditions in Europe and the effect of record-high fuel prices in theU.S.
He added that Ahold USA (where 60 percent of sales are generated) benefited from cost savings due to a focus on logistics and information systems. He noted that by combining itsU.S.banners into a single platform with one support office last year “drove a lot of cost out of the companies.”
Boer, who became CEO in March 2011, also is aggressively seeking to boost Ahold’s online business, to grow geographically and to add convenience stores to bolster slowing sales growth.
On February 27, Ahold announced plans to acquire largeNetherlandsonline retailer bol.com for 350 million euro ($466 million) to enhance its Internet sales. The international merchant also plans to grow from two stores to 10 inBelgiumby the end of 2012 and expand its “AH To Go.” convenience stores toGermany.
Additionally as previously announced, Ahold plans to cut costs by an additional 350 million euro ($571 million) over the next three years.
New CFO Jeff Carr, who joined Ahold in November, told Dow Jones after the conference call:
“We must put our cash to better use. It is not efficient to hold the current amount at the bank (2.6 billion Euros or $3.46 billion).”
Ahold will now seek to lower the amount of cash it holds to around 1 billion Euros ($1.33 billion), he added.