Dear shareholders,
In 2009, Ahold delivered solid results despite the severity of the economic downturn. Our achievements demonstrate the benefits of a consistent, customer-focused strategy. We gained market share in the Netherlands and at each of our banners in the United States and improved customer satisfaction, while successfully balancing sales and margin. Our sales grew six percent and we achieved an underlying retail margin of 5.1 percent, consistent with our mid-term target of five percent. Operating income from continuing operations increased by 9.6 percent. Reflecting the confidence in our strategy, our ability to generate cash and our strong balance sheet, we will complete a €500 million share buyback program over the next 12 months and propose a 28 percent increase in our dividend.
The economic environment remains challenging for our industry. The combination of deflation, down-trading by customers and the resulting increase in competitor activity will continue to affect us all. I continue to believe the weak will get weaker and the strong stronger. As a consequence of the decisive actions we have taken in recent years and the restructuring of our businesses, we are among the strong.
We successfully completed a €500 million cost reduction program at the end of 2009 and announced a new three-year €350 million program to be delivered by the end of 2012. It is essential that we continue to reduce costs and improve efficiency so that we can invest in price, service and quality for our customers.
In Europe, Albert Heijn continued to delight customers and perform strongly. The company yet again improved its price positioning and significantly increased its market share to 32.8 percent, primarily as a result of the successful integration of the 56 former Schuitema stores acquired in 2008. The market in the Czech Republic remains challenging, reflecting the economic and competitive environment. To improve our competitive position, we completed a major repositioning program in 2009 that included streamlining and rebranding our store portfolio, substantial cost-saving initiatives, and strengthening our customer offering.
In Scandinavia, our joint venture, ICA, also performed well. ICA Sweden had a particularly strong year, increasing market share, improving margin and delivering record profits. In Norway, the turnaround program began to show results and the business returned to profit in the fourth quarter. The extreme economic environment in the Baltic region severely impacted revenues and, despite exceptional cost savings and increasing market share, the operation lost money.
In the United States, our Stop & Shop and Giant-Landover businesses performed well, driving volume growth, market share, and winning new customers. This resulted in a 24 percent increase in operating income compared to 2008. As part of our ongoing repositioning of these businesses, we launched a new Value Program in the summer to provide even greater value to our customers. The initiative involved a new customer loyalty card program, new in-store signage, and more targeted promotional activity. At Giant-Landover, we continued to see the benefits of our Project Refresh store remodeling program. 2009 was the second year of the three-year program and we remodeled another 34 stores. At Giant-Carlisle, our improved price positioning and perception resulted in strong volume growth and increased market share in a highly competitive environment. In December, we announced Giant-Carlisle’s acquisition of 25 stores from Ukrop’s Super Markets in Virginia and Stop & Shop recently acquired five stores in Connecticut formerly operated by Shaw’s.
In November, we announced a series of changes to our European and U.S. organizations to create a strong platform for future growth. The reorganization is designed to ensure a sharper focus on local customer needs, create more efficient and effective support functions in each continent, and provide a more robust approach to business development. The changes will also further simplify and standardize processes and structure and ensure Ahold can integrate acquisitions more efficiently as it pursues its growth strategy. As a result of these changes, we named Carl Schlicker President and CEO of Ahold USA Retail and in the Netherlands appointed Sander van der Laan as General Manager for Albert Heijn.
At the Corporate Center, Lodewijk Hijmans van den Bergh joined Ahold as our new Chief Corporate Governance Counsel on December 1, 2009. He has been nominated for appointment to the Corporate Executive Board at this year’s annual General Meeting of Shareholders. His predecessor, Peter Wakkie, retired at the end of the year. Peter had been a member of our executive board since 2003 and played a major role in transforming Ahold. I would like to thank him for the enormous contribution he made and wish him well for the future.
We also continued to make progress with our corporate responsibility strategy. Along with over 500 of the world’s largest companies, we signed the Copenhagen Communiqué and supported the Consumer Goods Forum initiative on climate change. Locally, each of our businesses focused on activities in the community, including making donations to, and working with, food banks, non-profit organizations, governments and community groups. We also worked with national and local governments on a variety of issues. To help customers, we launched new healthy product symbols and additional products in our stores to make it easier for them to identify and choose a broader range. You can read more about our corporate responsibility strategy and our activities in our 2009 Corporate Responsibility Report.
In summary, I am pleased with our achievements in 2009. We continued to perform well, strengthen our business, increase market share, and attract new customers. Our employees – the core of our business – again made the difference with their unwavering commitment to caring for our customers. I, along with my colleagues on the Corporate Executive Board, extend our thanks and appreciation to them for their support and hard work. As we look to the year ahead, I am confident that with our strong position we will be able to take advantage of opportunities to further strengthen and grow Ahold for the benefit of our customers, employees and shareholders.
John Rishton
Chief Executive Officer
March 3, 2010