Ahold Delhaize N : Q1 2024 Management Prepared Remarks

Management's Prepared Remarks

Q1 2024 Earnings Call

May 8, 2024

JP O'Meara

Senior Vice President, Head of Investor Relations

Thank you operator, and good morning everyone.

I am delighted to welcome you to our Q1 2024 results conference call.

On today's call are Frans Muller, our President & CEO and Jolanda Poots- Bijl, our CFO. After a brief presentation, we will open the call for questions.

In case you haven't seen it, the earnings release and the accompanying presentation slides can be accessed through the Investors section of our website aholddelhaize.com, which also provides extra disclosures and details for your convenience.

To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to 2 questions. If you have further questions then feel free to re-enter the queue.

To ensure ease of speaking, all growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated.

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I'll now turn the call over to Frans.

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Frans Muller

President, Chief Executive Officer

Thank you JP and good morning everyone.

I am pleased to report a stable first quarter, placing us well on track to reach our goals and aspirations for the year.

2024 is an important year for our company as we pivot to our refreshed strategy which we are very much looking forward to unveiling in two weeks.

As we tee-up for this next phase of our journey, we are working hard to ensure we are fit and ready to transition to a more robust growth profile. On that front, three areas in particular drive much of our operational agenda for this year:

• Our relentless focus on the customer, our price positioning and assortments, and leveraging the strength of our great local brands;
• Further simplification of our organization to sustain growth investments and drive innovation;
• And as always, continuing to be laser focused on cost control and cash flow delivery

So let me briefly step into the first two of those and Jolanda will cover the third as we reflect on the first quarter.

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Although inflation is stabilizing in our markets, the price/value equation continues to be of utmost importance to our customers as household budgets remain tight. Therefore, our brands have been very active delivering great value, quality and savings to customers - creatively using the full spectrum of our own brand assortment and omnichannel toolkits.

• In the U.S., one example of this is at Giant Food, which has lowered prices on hundreds of its private-label items, and has expanded its Flexible Rewards loyalty program to include double points on Giant brand items purchased.
• Stop & Shop is partnering with the state of Rhode Island on its pilot governmental SNAP program called 'Eat Well, Be Well'. This program is the first of its kind in the U.S., providing SNAP recipients with up to $25 per month in additional financial incentives for purchasing eligible fruits and vegetables.
• And in Europe, at Albert in the Czech Republic, active users of the 'My Albert' app now receive a 15% discount on organic food and Nature's Promise healthy products. This is the third EU brand that rewards customers for choosing healthy products, following the Delhaize SuperPlus and Albert Heijn Premium programs.

Moving to the second area of our agenda for 2024, simplification of the organization. Unlocking the benefits of prior year interventions and building off the additional cost plans we put in place are delivering good results as we can see with the consistent margins we delivered in Q1.

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The largest of those simplification initiatives was the Belgium Future Plan. One year into the plan, the Delhaize team are making great progress, with many key milestones already achieved.

• In February, the team finalized agreements to franchise ALL of the 128 own operated stores.
• To date, 76 stores have already transitioned to their new owners, and we are on a good cadence to complete the transitions in the second half of the year.
• From those stores already transitioned, the results are very promising, with store sales, customer frequency and basket size all trending upwards.

In the US, we made a major move in the first quarter to streamline our support brands into one Ahold Delhaize USA support organization. This shift will bring all support functions together to seamlessly partner with the five great local brands so they can do what they do best - be the trusted local grocer in their markets and accelerate omnichannel growth. JJ will share more on this and our vision for growth in the U.S. at our upcoming strategy day.

In addition, our decision to orient our online fulfilment capabilities towards more efficient, less asset intense same-day delivery models such as click and collect is also paying off. Our online sales in the U.S. grew 5% year- over-year in the first quarter on a like-for-like basis, fueled by new customer growth as well as strong retention of existing e-commerce customers.

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We continue to make steps to further improve our e-commerce performance driven by:

• Labor efficiencies and cost rationalizations in all channels; transitioning from lower efficient fulfillment centers to our flexible
  "store first" network strategy; and
• The launch of our partnership with DoorDash is already off to a strong start with over 1,800 stores across all five brands now live with the DoorDash marketplace. The partnership is bringing new customers, which are primarily convenience shoppers that are typically purchasing smaller baskets but looking for a faster delivery time for an immediate need.

Driving more growth and leverage from our online capabilities is also a top priority for our European teams as we benefit from increasing demand and new external partnerships. One such aspect of the online experience that we are developing is an innovative proposition for business customers, with the ambition to offer quality and accessible services to a wide range of companies at an affordable price.

At Albert Heijn, the brand has entered into new B2B partnerships with large child care services and healthcare providers, including Holland Food Service a leading partner for care facilities. And they have also started offering all business customers a standard 10% discount on all organic and AH Terra products, Terra is Albert Heijn's fully plant-basedown-brand product line, as we extend our health and sustainability ambitions from the

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home to the workplace. Remember, our omnichannel customers are on average 2 times more valuable.

Driving healthy sales is a key selling point and one of our most important long-term ambitions. We are leaders in healthy product innovation and it is amazing the things that can still be achieved in product formulation. For example, in 2023 Albert Heijn reduced 115 million sugar cubes, 62 thousand kilograms salt and 275 thousand kilogram saturated fat from their own-brand products compared to 2022. And to enable customers to access more fiber rich foods, Albert Heijn also increased the number of wholemeal breads on the shelf while keeping the price similar to that of the white variety.

In terms of innovation on a more broader scale, two other new initiatives I want to highlight. Our participation in the Global Retail Innovation Fund, W23. And the launch of our new tech studio in Bucharest, called AD/01.

In April, we announced that Ahold Delhaize has joined forces with 4 other leading grocery retailers and have established W23 Global, a collaborative venture capital (VC) fund to accelerate innovation across the grocery retail ecosystem. The focus of this fund will be on investing in globally scalable, tech-led innovation transforming retailing and addressing common ESG challenges.

We also launched a new tech studio in Bucharest, called AD/01. The first talents are currently coming on board; the plan is to have around 250 top tech talents involved in this tech studio within the next few years, while

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fostering a vibrant inclusive engineering culture. They will work together on innovations with the aim of providing leading customer experience at Ahold Delhaize's European brands.

You will hear more on these at our strategy day on May 23 and I look forward to welcoming many of you in person to Zaandam.

Now over to you Jolanda to talk more about the financials.

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Jolanda Poots-Bijl

Chief Financial Officer

Thank you Frans and good morning to everyone.

Our performance in the first quarter once again highlights that we are a resilient company, with a portfolio of strong local brands in both the U.S. and Europe, allowing us to deliver a consistent set of results.

Overall, inflation rates are moderating in the US and have come down rapidly in Europe, impacting our top line. At the same time, we are still battling the cost inflation impacts in the center of the P&L. Looking at our financials for Q1, we have managed this inflation imbalance well, as we tightly manage our costs and actively look to drive leverage as volumes begin to improve.

Getting to the key underlying numbers for the quarter, as shown on slide 13.

• Net sales grew 0.4 percent at constant exchange rates, or plus 1.3 percent to 21.7 billion euro. This was negatively impacted by the divestment of FreshDirect and the cessation of Tobacco sales in our own operated supermarkets in the Netherlands.
• Group comparable sales growth was 1.6 percent.

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• Group net consumer online sales decreased by 1.0 percent, negatively impacted by 5.7 percentage points from the divestment of FreshDirect. This was offset by double-digit growth at Food Lion, Hannaford and Albert Heijn.
• Group underlying operating margin was 4 percent, in line with the prior year. Improvements in our European performance were offset by modest declines in the U.S. GSO insurance results were comparable to the prior year.
• Diluted underlying earnings per share was 59 euro cents, down 2.9 percent, primarily driven by foreign exchange rates and higher financial expenses and income taxes.

Slide 14 shows our results on an IFRS-reported basis for Q1.

The difference versus our underlying figures are mainly due to costs from our Future Plan in Belgium, as we transition stores to their new owners.

On slide 15, you see comparable sales growth by region including and excluding weather, calendar and other effects. This shows we experienced a positive impact from calendar shifts of one percentage point in the US, related to the timing of Easter and New Year's Eve. In Europe there was around a 50 basis point negative net impact due to various factors that I will explain shortly.

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