Q4 2024 Koninklijke Ahold Delhaize NV Earnings Call
Okay.
Sure.
Speaker Change: Ladies and gentlemen, good morning, and welcome to the Analyst Conference call on the fourth quarter and full year 'twenty 'twenty four results of ours that has a please note that this call is being webcast and recorded during this call I hope that has that anticipates, making projections and forward looking statements all statements other than statements of historical facts may.
Speaker Change: Forward looking statements forward looking statements are subject to risks uncertainties and other factors that are difficult to predict and that may cause our actual results to differ materially from future results expressed or implied by such forward looking statements.
Speaker Change: Therefore, you should not place undue reliance on any of these forward looking statements. The introduction will be followed by a Q&A session any views expressed by those asking questions on not necessarily the views of our that has Ah Ah.
J.P.M. Ara: At this time I would like to hand, the call over to J P. M. Ara Senior Vice President head of Investor Relations. Please go ahead JP.
JP: Alright, Thank you very much Karen and good morning, everyone.
JP: To welcome you all to our 2024 results conference call.
JP: On today's call are friends motor, our president and CEO and Yolanda put spite our CFO. After a brief presentation, we will open the call for questions.
JP: Case, you Havent seen it the earnings release and the accompanying presentation slides can be accessed through the investors section of our website at <unk> Dot com.
JP: <unk> provides extra disclosures and details for your convenience to ensure everyone has the opportunity to get their questions answered I ask that you initially limit yourself to two questions. That's two questions not fun for our questions and if you have further questions and feel free to reenter the queue.
JP: To ensure easier speaking all growth rates mentioned in today's prepared remarks will be at constant exchange rates, unless otherwise stated and without friends over to you.
J.P.M. Ara: Thank you very much J J P and good morning, everyone.
J.P.M. Ara: Reflecting on the year I'm proud of all that we've accomplished.
J.P.M. Ara: If I were to choose three works to summarize our year it would be commitment consistency and clarity.
J.P.M. Ara: Commitment is staying true to our values to deliver for our customers every day and consistency, it's sticking to our plants realizing another year of strong underlying performance and.
J.P.M. Ara: And clarity being clear on where we are heading as a company to our growing to get our strategy.
J.P.M. Ara: Commitment starts without people.
J.P.M. Ara: 2024 has been a dynamic and disruptive here with a lot of to do lots of things to deal with it.
J.P.M. Ara: Inflation volatility in commodities and supply chain, social and political tensions and fast paced changes due to new technologies and how we work and how we live.
J.P.M. Ara: Creating value for customers gateway to their local circumstances specific needs continues to be a tangible differentiator for our business.
J.P.M. Ara: And for this I would like to thank our passionate associates for living our values and their dedication to our performance driven culture.
J.P.M. Ara: Moving to consistency. This for me means sticking to our promises in 2024, we set you could depend on us for <unk>.
J.P.M. Ara: Our relentless focus on the customer our price positioning and leveraging the strength of our great local brands.
J.P.M. Ara: Continued advancement of our own brand strategies, increasing penetration and category depth.
J.P.M. Ara: First at Barrick for simplification and modernization of our organization to sustained growth and as always continuing to be laser focused on cost control and cash flow to reinvest in our customers and our company.
J.P.M. Ara: Looking at our scorecard, we were indeed, consistent and achieved or exceeded all of our key goals for the year.
J.P.M. Ara: At the same time, we also had the room to kickstart several growing together initiatives, which will pave towards 2025.
J.P.M. Ara: And then finally clarity, which is ultimately the key to great execution.
J.P.M. Ara: In May and June we crystallized, our game plan and ambitions for the coming four years building on our core strengths and looking with an open mind to the future.
J.P.M. Ara: We have an ambitious growth plan, where we want to grow faster than the industry, maintaining leading margins and deliver sustainable earnings growth.
J.P.M. Ara: And I'm, particularly proud of how quickly our teams have stepped into a new strategy with several actions already well underway.
J.P.M. Ara: Let me share a few highlights in this respect.
J.P.M. Ara: The first area is investing in our winning CVP the customer value proposition.
J.P.M. Ara: We want our customers to have vibrant experiences every time, they interact with our brands whether in store or digitally or at the intersection of the two.
J.P.M. Ara: To that end, we are elevating our digital solutions and also adding some secret sauce through AI and predictive analytics.
J.P.M. Ara: And in the U S. Our brands delivered 12 billion personalized offers for the year.
Speaker Change: Oh 1 billion increase compared to 2023.
Speaker Change: We also announced a new partnership with <unk> intelligence on digital coupons to further improve our types and savings.
Speaker Change: At alphabet to increase the modular E Commerce platform, which launched the final in a series of six launches across the European market.
Speaker Change: At Albert in the Czech Republic, the first brand on the new F earlier monthly App users have increased by over 20% and loyalty sales have increased nearly 10% compared to 2023.
Speaker Change: In tandem with our digital experiences. We also have been working hard on our assortment throughout the year.
Speaker Change: And sharing we offer the customer the freshest healthiest products on the market at great competitive prices.
Speaker Change: In this respect strengthening own brand assortment is key and we have a big ambition to increase own brand penetration over time to 45%.
Speaker Change: Our Hain is a front runner in own brand execution and in 2020 for more than 150 owned brand products or product lines, where award winning in consumer taste and quality elections.
Speaker Change: Our CSD brands make progress on the product organization.
Speaker Change: An additional 500 products, both price value and assortment differentiators to the rich.
Speaker Change: These products also play a vital role in increasing regional price favorites with all the CSD brands now having a minimum of 825 press favorites in the everyday assortment, which is an increase of 15% compared to 2023.
Speaker Change: In the U S. A major focus has been on raising the awareness of own brands quality and price relatively to national brands and during the last quarter U S owned branch sales growth outpaced the rest of the store in both dollars and units.
Speaker Change: The second aspect I would like to highlight today is the progress we are making to densify and grow our markets by.
Speaker Change: By prioritizing optimizing and sharpening our portfolio you will see a more pronounced a rigorous focus on growing customer reach and extending leading positions in our most profitable markets.
Speaker Change: During our strategy day in May J J presented the clear view for the future potential of the U S brands in this respect.
Speaker Change: One of those just a giant company, which is a regional presence local customer base and leading market positions, which is why I'm pleased about our new store opening of the brands in Philadelphia in December with two additional stores in the works for 2025.
Speaker Change: Additionally, 95% of the store fleet is now remodeled with the latest Florida Zane.
Speaker Change: On the flip side, making necessary interventions when brands are challenged is an essential contributor to elevating the quality of our sales.
Speaker Change: Successful completion of the Belgium future plan.
Affiliation project and the closure of the identified underperforming stop and shop locations demonstrated our company's ability to do so and where these projects behind us I will share next steps. The teams are focused on a little bit later.
Speaker Change: Next let's spend a moment on leveraging and lowering our cost base in an environment, where inflationary cost our concern for many households, our brands remain proactive to ensure that essential items are affordable and within reach for every wallet size.
Speaker Change: This is fueled by our save for our customers program, where we are proud that we exceeded our plans generating over $1 35 billion euros and cost savings in 2024.
Speaker Change: And always and although we always can do better to things, we can do really well in this respect our fact based negotiations through our should cost models and simplification, where we challenged ourselves to continuously improve and magnify it best practices.
Speaker Change: Two good examples of simplification through collaborations from last year include for example in the U S. The team began streamlining the support brands into one of the less USA support organization supporting all of our five local brands in a consistent and cost efficient manner.
In the <unk> region. The brands have completed the first phase of a project to standardized labor management, allowing for optimized store execution.
Speaker Change: Additionally, commercial operations have been standardized across all the CSD brands, including one centralized data support team.
Speaker Change: Consistent training across buyers and alliance calendars for negotiations.
Speaker Change: This will also provide opportunities for coffee to leverage as we unlock synergies in the coming years.
Speaker Change: Finally, let me spend a moment on healthy communities and planet.
Speaker Change: While the environment, we operate in continues to evolve our role and commitment commitment to support healthy communities and planet is unchanged.
Speaker Change: These topics remain key for long term business resilience.
Speaker Change: Our competitive advantage and aligned very closely with our values.
Speaker Change: Our brands continue to implement projects to promote healthy affordable food drive sustainable business practices, like reducing food waste and energy consumption and encourage diversity and inclusion in the workplace rift.
Speaker Change: Reflecting our respecting the local communities in which we operate.
Speaker Change: One such example is our <unk> in the Netherlands, it's focus on healthy and sustainable products has contributed significantly to its growth in market share and customer loyalty.
Speaker Change: The percentage of AUM rent healthy food sales in <unk> increased to close 200 basis points in 2010 before while the organic range and plant based assortment the Brent <unk> op Terra are extremely popular.
Speaker Change: So in summary, as released 2024 behind there are lots of positives to leverage and build upon in 2025.
Speaker Change: I will share a few of our plans for the year a little bit later, but now over to Yolanda to share her remarks and insights in our numbers.
Yolanda: Thank you, France, and good morning to everyone.
Yolanda: Great thing about being a grocery retailer is that we are constantly connected to our customers personal and digital connections, we have with them understanding their needs in real time is a powerful asset and combined with the agility and entrepreneurial spirit of our great local brands.
Yolanda: Through a steady and growing market shares strong relative brand strength. We can see we are doing the right things as customers choose to shop with us every day.
Speaker Change: Frans mentioned, we are very pleased with how we ended the year strong holiday sales. Thanks, a fastest assortments and shopping experiences that offer customers everything they needed to celebrate the season.
Speaker Change: On slide 18, and 19, we present, the key underlying numbers for the quarter and the full year to summarize.
Speaker Change: Sales, great, 0.6% to $23 3 billion euro during the quarter.
Speaker Change: 0.9% to $89 4 billion euro during the full year.
Speaker Change: Sales benefited from positive comparable sales ex gas and store openings the.
Speaker Change: The end of tobacco sales in the Netherlands, the closure of underperforming stop inshore locations and the divestment of fresh direct impacted net sales growth by two points, one and one seven percentage point for Q4 and full year respectively.
Speaker Change: Online sales increased by five 8% in Q4, and three 5% for the full year.
Speaker Change: The divestment of fresh didact had a negative impact of five one percentage points for the quarter and $6 nine percentage points for the full year.
Speaker Change: Excluding fish direct we saw double digit growth rates at many of our brands, including all the time and food Lion.
Speaker Change: Underlying operating margin for the quarter was four 1% a decrease of 20 basis points. This is last year may.
Speaker Change: Mainly due to lower nonrecurring items in the U S related to holiday approvals.
Speaker Change: Full year underlying operating margin for 2024 plus 4.0%.
Speaker Change: Diluted underlying earnings per share was <unk> 69 for the quarter and two euros 54 cents for the full year in line with our guidance.
Speaker Change: Our operating income for the quarter was 607 million Euro <unk>.
Speaker Change: Presenting and I are friends operating margin of two 6%.
Speaker Change: I have first results with 351 million lower than the underlying results largely related to an amendment and additional funding of the Dutch pension plan.
With this change we have reduced our overall pension risk exposure and have eliminated the annual variability in the noncash service charges.
Speaker Change: For the full year, our operating income was $2 8 billion year round, representing an iPhone, that's operating margin of three 1%.
Speaker Change: I forget results for 824 million lower than the underlying results largely due to cost associated with the following elements.
Speaker Change: The transition of stores as part of the Belgium future plan, the closure of stop and shop stores and the amendment to and additional funding of the Dutch pension plan.
Speaker Change: Let's take a closer look at our Q4 performance starting with revenues.
Speaker Change: Q4 comparable sales with one 4%, which includes a negative net impact of 0.1 percentage points from weather and calendar shifts.
Speaker Change: And a negative impact of 1.1 percentage point from the end of tobacco sales in the Netherlands.
Speaker Change: U S comparable sales showed a positive net impact from calendar and weather of 20 basis points.
Speaker Change: In Europe, there was a ranked three four percentage points negative net impact from tobacco and calendar.
Speaker Change: Looking at the regional performance U S. Net sales were $13 9 billion euro comparable sales, excluding gas increased one 2%, excluding net weather and calendar impact.
Speaker Change: <unk> growing positive comparable sales momentum and a return to positive volumes during the fourth quarter.
Speaker Change: And in addition to the calendar and weather impact net sales were impacted by the following.
Speaker Change: Around 110 basis points from the impact of stop and shop closures.
Speaker Change: Around 80 basis points from the divestment of fresh direct.
Speaker Change: And around 25 basis points from a decline in gasoline sales.
Speaker Change: Online sales growth of 10, 9% adjusted for the impact of fresh direct was a key highlight of the quarter customers are responding positively to our partnership with door Dash well, we continue to see in our mind award is accelerating with a 20% increase in number of orders in Q4 compared to Q3.
Speaker Change: <unk>.
Speaker Change: Underlying operating margin in the U S was four 2% in line with the third quarter. The margin performance year over year was impacted by lower nonrecurring items price investments at stop <unk> shop, the net unfavorable impact from a change in sales mix and wage inflation.
Speaker Change: In Europe fourth quarter trends were again strong net sales were $9 4 billion euros up two 4% despite being negatively impacted by two eight percentage points from the end of tobacco sales in the Netherlands.
Speaker Change: Excluding the impact of tobacco and calendar shifts comparable sales increased four 7%.
Speaker Change: Like in the U S online sales growth was robust increasing by 10, 9%.
Speaker Change: Underlying operating margin in Europe was four 4% up 70 basis points. This was mainly driven by strong performance recovery in Belgium, and lower energy costs.
Speaker Change: We think it's important to appreciate the strong value creation, leading market positions and opportunities being delivered by our European teams.
Speaker Change: Our battalion achieved its sixth consecutive year of strong growth further expanding its market share to 37, 7%.
Speaker Change: Courted by an increase in number of customers and create loyalty among existing customers.
Speaker Change: In Belgium continues its strong market share recovery following the transition of stores to the affiliate model with an improved net promoter score increase in number of customers and market share at year end, well above pre announcement levels.
Speaker Change: Finally, following a strong holiday period Bull so an acceleration in sales growth achieved.
Speaker Change: We achieved an all time high in App users and recognize its higher highest ever quarter of sales.
Speaker Change: This in combination with double digit growth in advertising services.
Speaker Change: And our relentless focus on cost management drove the incremental increases in profitability with full year underlying EBITDA growing to 185 million up from $159 million year round.
Speaker Change: Part of both competitive advantage is its best in market proposition, giving access to over 47000 sales partners.
Speaker Change: An example is a flourishing collaboration with Leeco. In addition to compelling holiday campaigns, which drove 25% increase in legal sales well also introduced a pop up legal shelf, which was a resounding success with a second pop up already planned for later this year in Belgium.
Speaker Change: Moving now to free cash flow Q4 free cash flow was $1 3 billion Euro which represents an increase of 227 million euro compared to Q4 2023.
Speaker Change: At the full year, we realized a free cash flow of over $2 5 billion euro exceeding our guidance of the year.
Speaker Change: Our net capital expenditure for the year was below our original guidance in part due to timing of certain projects shifted to 2025.
Speaker Change: A planned distribution center expansion football.
Speaker Change: Slower store, Rollouts, and CSC and delaying some remodels in the U S to calibrate more efficiently to our new strategy.
Speaker Change: Capital expenditures are running slightly lower the strength of our underlying operations allowed us to take the opportunity to optimize our future pension obligations in the Netherlands with additional funding to the Dutch pension plan of 105 million Euro.
Speaker Change: To complete the picture on Slide 27, you can see our net debt bridge year on year. Despite run returning 2 billion euro to our shareholders. We were able to show a decline mainly due to healthy free cash flow levels, partially offset by the impact of foreign exchange rates on that debt.
Speaker Change: With these results I'm pleased to announce our proposal to increase the dividend per share by six 4% for 2024 to one euro and 17 cents per share.
Speaker Change: We've also initiated the 1 billion Euro share buyback program for 2025 on December 30 last year.
Speaker Change: Finally, let me provide some insights in our healthy community and planets priorities.
Speaker Change: In 2024, the percentage of owned brand healthy food sales was 52, 4%.
Speaker Change: This represents a step up of almost one percentage point compared to 2023.
Speaker Change: If we exclude the negative impact of around three five percentage points from the transition to Nutri score 2.0 for our Dutch and Belgium, France.
Speaker Change: Total tons of food waste pet food sales was 35% lower than our 2016 baseline.
Speaker Change: This is a similar result as in 2023. However, it includes a negative impact of four percentage points from improved data quality and measurement in the U S.
Speaker Change: In Europe performance improved driven by closer collaboration with partners to increase food bank donations.
Speaker Change: We've reduced our C O two emissions in our own operations by 36% compared to our 2018 baseline.
Speaker Change: An improvement of 2% versus last year, driven by the installation of more sustainable refrigeration systems in the U S stores and an increased use of clean energy in Europe.
So Virgin own brand plastic packaging, we can report a 10% reduction comes back to 2021.
Speaker Change: Which is equal to a reduction last year.
Speaker Change: Our brands were able to increase the percentage of recycled content and continued to implement initiatives to replace backtick packaging with paper or cardboard.
As we move to our outlook for 2025, we have several levers at our disposal to navigate the environment.
Speaker Change: Using are going to get our strategy and our growth model as a guide you can count on us to keep a steady pace as we accelerate new store openings, and remodels and prioritize and add to the scope of price investments.
Speaker Change: We will enrich our omni channel capabilities driving growth in customer loyalty and expanding our reach scale technologies that have a proven and successful track record.
At the same time, we will also be focused on integrating trophy, our 17th great local brand.
Speaker Change: Here are some of the impacts to our 2025 financials you have to take into account the <unk>.
Speaker Change: Integration will add around 3 billion euro in net sales.
Speaker Change: The dilutive impact to our European margin in the first year they'll be offset by improvements in the rest of the EU region.
Speaker Change: Taking net financial expenses into account. This will result in a net neutral impact to underlying EPS performance and finally, adding profi impact our capital expenditure by around 150 million Euro which includes maintenance capex as well as plans to open around.
Speaker Change: 100, new Profi stores.
Speaker Change: For our reported sales numbers in 2025. There are also a few other specific factors you want to reflect in your expectations.
Speaker Change: Let's stop and shop store closures are estimated to have an impact.
Speaker Change: 550 and $575 million.
Speaker Change: That will be around a one percentage point impact on reported and comparable store sales in Europe due to the end of tobacco sales at all the times franchise locations in the Netherlands.
Speaker Change: In the first half of the year as well as due to the new regulations coming into force in Belgium from April 1st.
Speaker Change: Putting everything together for 2025 outlook, we expect an underlying margin of around 4%.
Diluted earnings underlying earnings per share growth of mid to high single digit and a free cash flow of at least $2 2 billion euros combined with the step up in our gross capex to $2 7 billion euros.
Speaker Change: And as I said at strategy day, Theres, a lot to like about our plan for the coming years, including 2025, it's balanced it's about growth and it's about industry, leading margins and our cost discipline, we are investing in the future and in cash generation, resulting in growing shareholder returns and we.
France: Not dependent on one element to drive values since we have multiple levers to deal with volatility and economic political or social context with that let me hand back to France to give you a flavor of our priorities for this year.
Speaker Change: Thank you very much.
Speaker Change: Much of our success over the past years comes down to doing the basics of good retail well while at the same time innovating for the future.
Speaker Change: Customers are responding positively to our actions with increasing engagements with our apps and loyalty programs and more frequently becoming omni channel shoppers and with a growing preference for our own brand products.
Speaker Change: So the Orange now is to continue to invest with us winning formula.
Speaker Change: Considering our investments show that to build upon each other overtime and thus yielding compounding growth.
Speaker Change: For 2025, we will be doing four key things.
Speaker Change: Celebrating new store openings and Remodels.
Speaker Change: Prioritizing, adding to the scope of price investments.
Speaker Change: Enriching, our omnichannel capabilities, and therefore, driving growth and customer loyalty and scaling technologies that have a proven and successful track record.
Speaker Change: Our underlying operating margin guidance of around 4% and our gross capital expenditure plans of around $2 7 billion Euro are reflective of these stuffs.
Speaker Change: Yeah.
Speaker Change: We are ready to step up our branch organic store growth and remodeling program in the U S. On top of the giant company stores, we expect to open an additional 10 stores. This year starting with the recent launch of a new food Lion and Troutman North Carolina.
Speaker Change: We've also increased the pace of remodeling in the U S, including the resumption of Remodels at stop <unk> shop.
Speaker Change: In 2025, we will build on the good work of 24.
Speaker Change: And layer in the first round of the planned 1 billion dollar priced investments we outlined from the payer for the period 2025 to 2028.
Speaker Change: All brands will make price investments throughout the year.
Speaker Change: Much to the local position and pricing strategies.
Speaker Change: In Europe, our teams in central and South Eastern Europe, we will be focused on the integration of Coffey and with trophy. We at over 1700 stores and we will serve an additional one 3 million customers on a daily basis.
Speaker Change: We will continue to invest decisively and with focus on our strategic priorities across the region also to capture more opportunities from technology and sustainability.
Speaker Change: In Belgium, our teams will build on the successful transformation by further evolving our omnichannel proposition.
Speaker Change: For example by launching a new home shop center, putting ecommerce on the path to profitability.
Speaker Change: And we also recently announced subject to regulatory approval. The planned acquisition of gel food, which includes 325 bunch of sale.
Speaker Change: And we're just acquisition.
Speaker Change: This will open new potential in the medium term in the fast growing convenience space.
Speaker Change: And in terms of scaling our technologies, we will rollout SSP as for Hana to our European brands to establish one standardized global financial backbone and ramp up operations at our <unk> checkup in Romania.
Speaker Change: Which alongside other our other data and tech teams will support the development of new digital data and tech capabilities.
Speaker Change: These examples demonstrate we have a clear plan for the year, we will continue to build scale, where it makes sense and at local where we can make the difference.
Speaker Change: Our guidance for 2025 is consistent with our growing to get ambitions and we are fully committed to realizing the growth opportunities and value creation that is ahead of us.
Speaker Change: I am pleased to say that we're off to a good start for the year.
Speaker Change: Carrying the good momentum from the holiday season, and this gives us confidence for another good year for our brands communities and company.
Speaker Change: With that Sharon Please open the line for questions.
Speaker Change: Thank you to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: These dunbar, while we compile the Q&A roster.
Speaker Change: Thank you we will now go to our first question.
Speaker Change: One moment please.
Speaker Change: And your first question comes from the line of Robert Jan Vos from ABN Amro Odell BHF. Please go ahead.
Speaker Change: Yes, hi, good morning, all and thanks for taking my questions.
Speaker Change: First one.
Speaker Change: Concerning your comments from Profi and Europe is it fair to assume that's included growth you expect a roughly flat underlying EBIT margin of error of about three 8% of core Europe. In 2025. So that's my first question and my second question you started surprise.
Speaker Change: The investments that stop and shop and this will continue in 2025 mm and.
Speaker Change: Can you elaborate a little bit on the first effect you've seen of.
Speaker Change: Of those initial price investments.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Yes. Thank you for your question, Robert John and as you know, we don't give guidance on a on a regional level and for the next year, we turned around 4% and like I said that strategy. Ultimately, we believe based regions off 4% plus regions and I have to leave it at that.
Speaker Change: And John on price investment U S.
Speaker Change: Yeah.
Speaker Change: We have communicated this growing together a strategy.
Speaker Change: CAGR of 4% for the total period of sales CAGR and on an average 4% margin and of course, you don't form Cliff in January to start with the plant. So you prepare already.
Speaker Change: Mostly in the U S with price investment to already cater for growth and therefore, maybe not a surprise, but it's good to know that we had positive volumes in the U S in the fourth quarter and.
Speaker Change: The first is the first period of the year was a very positive theory to US also there we saw growth in volume for the total U S. And we also saw effects positive effects with stop <unk> shop brand, where we invested in and in pricing, but also in proposition in customer value and private brands are these kind of things so.
Speaker Change: We are very happy with the momentum how we came out of the fourth quarter for the total U S. And we also can confirm that we see positive upticks for stop <unk> shop in the start of the year with the price investments, we already made and will make further ultra in the year and let's not forget that we set for the strategy period, we said that one bill.
Speaker Change: And price investments of dollars for the U S and we will also into 2025 here do those price investments across the total year for our U S brands.
Speaker Change: And maybe to add to that France, if you look at stop <unk> shop Indeed.
Speaker Change: We started with very died of Rhode Island, why we are at all the stores that Rhode Island have reduced prices of almost 3500 product. So I think our customers will really experience. It and we are indeed happy that we ended with positive volume say those five investments at large it's not only stop and shop, we see that pause.
Speaker Change: This trend really paying out.
Speaker Change: Okay.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Speaker Change: We will now take the next question and the question comes from the line of is about the <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Hello, Good morning, and thanks for taking my questions My.
Speaker Change: That's one.
Speaker Change: So you can kind of disclose this but.
Speaker Change: But could you comment on the actual locked have labs with its business.
Speaker Change: Example, where do you see the steady state margin for this business the synergies and what level of synergies do you have in mind.
Speaker Change: For example is the business breakeven today it would be good to understand what do you have in mind on the multiyear view could this business be.
Speaker Change: 2025, given the amount of spend.
Speaker Change: And then my other question is just with New York mortgage.
Speaker Change: If we exclude the one offs. It was down 20 bps I guess in Q4. So is this a realistic run rate of the level of decline that we can expect for the phone calls.
Speaker Change: On the profit question and thank you for your questions you have to repay repeat your last question for me you sorry, I lost track that but the proofing question that you asked over time.
Speaker Change: We do expect profit with the synergies that we can realize together.
Speaker Change: That profit will trend in line with the European margins are that we guide for for the other brands as well.
Speaker Change: On our current operating profit level, they are profitable, but as you are probably aware we intended to close the transaction last summer it took a bit longer so the synergies I'll take take a bit longer. So in the next year. We are now preparing for those synergies and they will treat pain at the wheel.
Speaker Change: Synergy a payback will start in 2026.
Speaker Change: Could you repeat your second question. Please.
Speaker Change: Yep.
Speaker Change: My second question was on the U S margin.
Speaker Change: If I look at the level of decline over Q4, excluding the one off I guess it implies down 2030 basis points, which was in line with what you guided.
Speaker Change: Okay.
Speaker Change: I was wondering is that the level of decline we should expect over the first half of the.
Speaker Change: The year before those prices that you become annualized in the run rate.
Speaker Change: Thank you for your question and thank you for repeating it and for US as you know and we're sorry for that but we don't give guidance on regional level for our margin 70, <unk> company as a whole we will trend around 4%, but if you take out the one offs U S margin is expected.
To be stable.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Glenn.
Speaker Change: Oh you are there.
Speaker Change: Thank you.
Speaker Change: We will now go to the next question.
William Wallace: I'm doing next question comes from the line of William Wallace from Bernstein. Please go ahead.
William Wallace: Hi, good morning, Thanks for taking the questions.
Speaker Change: I think it kind of pick up on the U S market and again I think there's a lot of nervousness about that especially when you think about FY 'twenty five does the U S margins need to go down before it goes back up and I think I'm thinking about the commentary that you've made around the impact of price investment.
William Wallace: Well mix of wage inflation impacting our margins in that space.
Speaker Change: The question is why don't they repeat again.
William Wallace: And then the second one is bigger.
William Wallace: Bigger picture question.
William Wallace: There's been changes at the FTC has been.
Speaker Change: Changes in the M&A.
Speaker Change: The M&A environment in the U S. Why did you take advantage of that emerge with Kroger.
Speaker Change: Yeah.
Speaker Change: Take care of them.
Speaker Change: Thank you for your advice by the way in France will go into a suggested merger if we look at that nervousness around the U S margin I can understand that but keep in the back of your head we presented a growing to get a strategy, where we stated that we are going to invest in prices.
Speaker Change: Over the period of our grading together strategy. So its not a one off in 2025, it's you know sequencing those investments to get the best return, we can get and if you look at the whole year at the U S level, although we do not give guidance on a regional level margin. The margin also in the U S will be rather stable.
Speaker Change: For the full year as a whole because we're balancing our investments and the upsides we're creating.
Speaker Change: Yeah.
Speaker Change: And we've talked about it earlier I think you Yolanda ocean in previous quarters, because sometimes we talk about.
Speaker Change: The margins in Europe, we see them recovering now we talked about the margins here in the U S. We have a business where both regions are at 4% margin companies.
Speaker Change: And that's therefore also not a surprise that youll see in our growing together strategy that 4% margin coming back again and we.
Speaker Change: We have been always a 4% margin in the U S with won't don't want to change that.
Speaker Change: And we are recovering to a 4% margin in Europe, knowing that we had some deviations with the Belgian business on your kind of suggestion recommendation on this otherwise boring once that maybe.
Speaker Change: Talked about Kroger.
Speaker Change: We always are shared with you that.
Speaker Change: We are having an open view on expanding our business also inorganically when opportunities arise which are in line with our strategy.
Speaker Change: And that's why you have seen Dell foods. That's why you have seen trophy in Europe, which is in.
Speaker Change: In line with strategy, giving us more strength in market as well.
Speaker Change: And also like in the past, we opened two opportunities Inorganically if.
Speaker Change: If those fit our.
Speaker Change: Our strategy as such we have a strong balance sheet as you know so we have the firepower in itself, but we come back to you. If we have a fair to ideas on M&A in total.
Speaker Change: Thank you can I just clarify on the price investments.
Speaker Change: With periods of.
Speaker Change: Great cause the strategy I think you previously said that they would accelerate into the third quarter of 2025, Keith do you still see them accelerating into 2025 from 'twenty to 'twenty cool right.
Speaker Change: Yes, there is an acceleration from 'twenty to 'twenty four into a growing together period, but the 1 billion that we talked today. These are sequenced over the full going together period.
Speaker Change: And in the 2025 years is also spread with branch through the year as well exactly.
Speaker Change:
Speaker Change: Thank you very much.
Speaker Change: You're welcome.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Frederic <unk> from Jefferies. Please go ahead.
Yolanda Ocean: Good morning from Yolanda JP and team. Thank you for taking my questions.
Speaker Change: It's really about just understanding the moving parts.
Speaker Change: Within the guidance. So first are only around 4% margin guide.
Is that consistent with both ends of the mid single digit to high single digit.
Speaker Change: EPS growth range.
Speaker Change: Which of the where and the sales do you see the bounds of those that guidance EPS growth coming from.
Speaker Change: Secondly from a simple question.
Speaker Change: Free cash flow level.
Speaker Change: It right to think that if you deliver mid single digit EPS growth, we should be looking at $2 2 billion.
Speaker Change: A free cash flow or is that an absolute.
Speaker Change: No matter, where infusion of a high single digit do you think free cash flow can get too. Thank you.
Speaker Change: Okay. Thank you for your questions.
Speaker Change: The margin of rainfall is consistently at a mid to high single digit earnings per share guidance that were given it's a combination of growth share buybacks and ethics impact, which is favorable for the year at current rates.
Speaker Change: And at least $2 here. It is at least $2.2 billion of free cash flow that we are guiding on and say that's the floor. One could say well you also gave a $9 billion free cash flow for the total strategy barrier to yes and.
Speaker Change: We are at the beginning of the year. So we said at least two two for 2025, it's a <unk>.
Speaker Change: Driving for more as a waste as a trough for February.
Speaker Change: And let's not forget that we also gave you a $2 7 billion Euro Capex number for this year to.
Speaker Change: To take the necessary steps to bottleneck further our our assets to build stores and to invest further in technology and data. So those things of course also fits together.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Francois the Gao from Kepler Cheuvreux. Please go ahead.
Speaker Change: Hello. Good morning, Thank you for taking my question.
Speaker Change: Could you come back on the U S. I believe recovery as had been through all your brothers on how does it compare to your assumptions.
Speaker Change: Markets.
Speaker Change: My second question would be able to publicly available.
Speaker Change: Are you finding the runs players or are you shipping some dry all the frozen products from Europe. Thank you.
Speaker Change: So the second question was do we find the right supplier base for our private brand strategy is that your question except in the U S. Yeah. So.
Speaker Change: Let me take.
Speaker Change: It takes a little bit broader because could request we get questions questions on tariffs as well we are in food retail. We all have we have a very small number of our sales in general merchandize to start with food retail is very local.
And although we import a few things from Asia and Europe.
Speaker Change: A relatively small share and it's very much a level playing field for.
Speaker Change: For the competitors, we compete with them, but it is a very local business food. So the tariffs will not most likely not have there has been a heavy impact on us.
Speaker Change: Second thing was the element of price investments and therefore also volume growth, yes, we see volume growth in all our brands in the U S.
Speaker Change: As I indicated before.
Speaker Change: We intentionally did.
Speaker Change: Did this because we would like to deliver on our first year of growing together, which is a growth strategy as you know.
Speaker Change: And that's why we started in the fourth quarter already with our preparations and we're also happy to see that also the start of the year as I mentioned before.
Speaker Change: A very good start on growth and on volume.
Speaker Change: And so yes, that's what's our plan. This was a promised will be growing to grow our business and that's 4% CAGR for the total the strategy period is for US also the targets to deliver them.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of sight on table from the golf player to come can you go ahead.
Speaker Change: Yes. Good morning, it's been on the board for you to come in a couple of questions. My side I remain a little bit puzzled from the U S margins.
Speaker Change: Because you say, we have a negative of unfavorable impact from changes sales mix.
Speaker Change: But you closed down just off the shelf stores you also had a lots of impact of.
Speaker Change: The first direct up happened, which I thought had a positive impact on margin. So could you elaborate a little bit on that part.
Speaker Change: And then coming back on the amendment for the Netherlands, you said home with $8 million impact on your cash flow.
Speaker Change: What could we expect that going forward because I thought the charts are quite bigger than that one.
Speaker Change: And maybe to come back on the last question on Europe I.
Speaker Change: I thought you said in the call that you assumed.
Speaker Change: The dilutive impact of <unk> to be compensated by improved.
Speaker Change: Improvements in the rest of the business. So I still think that there's kind of three 8% margin for 2024 or do we need to compare to with progress in Q4 of 'twenty three 'twenty four.
Speaker Change: So on the on the margin composition in USA and the central question for now.
Speaker Change: Indeed, we have not been maybe it completely properly to complete here and there.
Speaker Change: Two elements, which are also not helping our margin first of all our online sales growth.
Speaker Change: We grow double digits, which is strategy and we're very proud about that number and that is of course dilutive to our overall margin and the second thing is we also grow in pharmacy and you have you have heard it before with other players in the U S and that is also dilutive to <unk>.
Yolanda Ocean: Yolanda the other things of course and thank you for the question starting on the pension settlement in our unusuals for the quarter. That's 280 wind it for pension settlement of which 205 is cash related and the remainder is the remainder remaining part is the balance sheet settlement.
Yolanda Ocean: And after 205 cash impact we paid already 105 in 2020 for the remainder of that 100 million is spread over the period to come and factored in our guidance.
Yolanda Ocean: Okay. Thank you.
Yolanda Ocean: And your last question, yes, I like I said, I feel a bit repetitive, but we don't give that guidance Ah sorry, it's up to you to conclude on a group level, we will deliver around 4%.
Yolanda Ocean: Thank you.
Yolanda Ocean: Youre welcome.
Yolanda Ocean: Thank you.
Speaker Change: Your next question comes from the line of Sweda My colleague from UBS. Please go ahead.
Speaker Change: Hi, good morning.
Yolanda Ocean: France Yolanda JP. Thanks.
Speaker Change: Taking my questions.
Speaker Change: A couple.
Speaker Change: Maybe I think crunchy reppert to growing together strategy a couple of times.
Speaker Change: The Q&A the folks and say, okay. Good and then average 4% margin over the next four years.
Speaker Change: In that context is 2025, a year of investing I E.
Speaker Change: Below 4% margin is that why you're calling out around work to help you move towards the hoops and sales CAGR.
Speaker Change: Beyond this year and then obviously get you back to at least books and margin trajectory that you've enjoyed over the past few years. So that's the first one and secondly, if I can just very briefly go back to help food use margin comments you made.
Speaker Change: Within the year is there some phasing to be for.
Speaker Change: For us to be thinking about in terms of particularly close talk perhaps that's where some of us were trying to explore a bit more so if you could just help a little bit.
Speaker Change: Give us a little bit of an idea in terms of phasing.
Speaker Change: I'll start with the second half.
Speaker Change: Maybe very lastly, sorry to squeeze one more in just.
Speaker Change: Just in terms of run rate. This year I think you referred to a good start but anything you can share in terms of current trading so far perhaps versus Q4 run rate.
Speaker Change: Great.
Speaker Change: Good to hear you.
Speaker Change: Yeah.
Speaker Change: Sometimes we are asked us for almost weekly guidance as of our results.
Speaker Change: But oh.
Speaker Change: I appreciate the interest and the curiosity.
Speaker Change: On the on the total plan, yes, CAGR of 4% growth, yes, and leverage 4% margin.
Speaker Change: And.
Speaker Change: We gave that guidance too.
Speaker Change: Jeff a little bit of flexibility.
Speaker Change: Over over time, because we are we would like to bring that growth if.
Speaker Change: If you didn't break it down what does it mean for 2025.
Speaker Change: But I think it's too early to too.
Speaker Change: These kinds of things, we just started the year.
Speaker Change: We started the year.
Speaker Change: Better than our 4% growth at the beginning of the year or so.
Speaker Change: We are a good start in 2025. So that's why the teams are ultra in the U S. And also in Europe are quite quite happy with that start and let's not forget I mentioned that before.
Speaker Change: You cannot think about your strategy on the first of January.
Speaker Change: Did that are starting up and ramp up earlier and and also in Europe. If you. If you take the tobacco sales out. We also grew in Europe in the fourth quarter $4, 7% already.
Speaker Change: So that growth is coming I mentioned volume growth in both regions and we work very hard to keep it like that so.
Speaker Change: Let's see where we are when we talk to each other in the first quarter.
Speaker Change: Developed in.
Speaker Change: In the beginning of this year the three that we don't expect huge swings, we do things step by step in like France that are we have the opportunity because we had to get.
Our second half of last year to already 10 kilowatts of strategy. So we're phasing in and and I Didnt expect to make a big move.
Speaker Change: Thank you both.
Speaker Change: Thank you we will now take our final question for today.
Speaker Change: And the final question comes from the line of Mike themes stand out from IMT Bank. Please go ahead.
Mike: Hi, Good morning, and thank you for taking my question being the last I'm going to focus on Europe instead of the U S.
Mike: Could you elaborate a bit on the building blocks for the improvement in margin in Q4, excluding bullet was definitely a stand out performer in terms of margin in the different countries Europe instances could you provide a bit of.
Mike: Light on this as well please thank you.
Mike: Yeah.
Mike: Thank you for that thank you for the question and also for focusing on Europe, because we are quite tired of how our European teams are indeed, performing the big swing in and in the European margin is coming from the Belgium future plan I mean, we we of course invest at a in the Belgium transition the 100 and trade 20.
Mike: Stores are now affiliated and you know they out they are outperforming the business cases, we had in recovering market share faster than we had we are now at a level of market share that is higher than before we started the plan. So you can really see that that intervention, which was a heavy one is paying out and know and that margins.
Mike: A trending faster than we expected towards.
Mike: The targets that we set but also of course, all the Titan had a tremendously well our Q4. So I used the line very happy with the European performance and the Belgium future plan makes a difference.
Yolanda Ocean: Yolanda mentioned already at Liberty <unk> and of course, we are.
Yolanda Ocean: Got to our closing of the project delivered later the plant Luckily like Yolanda already mentioned, but it's very nice to see that the team's come very nicely together.
Yolanda Ocean: Good integration process of course.
Yolanda Ocean: Six months more time to prepare that so we are super well prepared teams or no.
Yolanda Ocean: Working on the synergies and.
Speaker Change: I'm quite confident that this will be a great thing for our business in Romania. The complementarity of the business 3 billion sales more so.
Yolanda Ocean: Europe will show a good number and to close off this the last question Oh I sound repetitive Yolanda.
Yolanda Ocean: Our business in the U S is a 4% business our business in Europe is a 4% business and you will see that number in Europe, coming and you won't see us losing the number in the U S. So.
Yolanda Ocean: And thank you very much for your curiosity today.
Yolanda Ocean: And for your attendance to the call.
Yolanda Ocean: And.
Yolanda Ocean: Speak to you in the in the quarter, one that is not that far from now we look forward. Thank you.
Yolanda Ocean: Thank you. This concludes today's conference call. Thanks for participating you may now disconnect.