Dutch retail group Royal Ahold has reported it made a net profit of €853m during 2010, representing a 4.6 per cent downturn compared with the €894m net income it achieved the previous 12 months.
Although the retailer did manage to boost its overall operating income by 3 per cent to €1.34bn last year, as well as securing a slight increase in pre-tax profits to €1.08bn from €1.01bn in 2009, its income from continuing operations was down 11.2 per cent year on year to €863m.
According to a financial statement released by the group, the higher operating income and a decrease in net costs had been 'more than offset' by higher income taxes and a lower share in income from the company's joint ventures.
Ahold's income tax bill in 2009 had been positively affected by the inclusion of 'deferred tax assets' relating to a net operating losses in the US carried over from previous years, it pointed out.
However, chief executive Dick Boer said the group had delivered 'another solid performance' in both Europe and the US and, despite the entire food retail business facing what he described as 'another challenging year', had managed to grow its volumes and market share in its major markets.
'For the full year, sales grew by 4.4 percent at constant exchange rates and after adjusting for the impact of an additional week in 2009,' Mr Boer explained, adding that its profits had been limited slightly by its recent acquisition of US-based bakery and prepared meals company Ukrop's in early 2010.
'We reported an underlying retail operating margin of 4.9 percent; excluding the Ukrop's stores we acquired in 2010, the underlying retail margin was 5.1 percent, the same as in 2009.'
According to Mr Boer, shoppers continued to focus on value, driving intense promotional activity, particularly in the US, during the final three months of last year.
'Operating margins were negatively impacted by cost inflation that was not fully passed on to customers,' he observed. 'We increased volumes and improved market share in the Netherlands, the Czech Republic and in the US.'
The coming months will remain challenging for the food retail industry, he predicted: 'Although there are signs of a gradual economic recovery, we expect consumers to remain focused on value and cautious in their spending in an inflationary environment.
'We will continue to reduce costs so that we can invest in our offering to improve the value we provide, while managing the balance between sales and margin.'
Ahold said it remained on course to achieve net sales growth of 5 per cent, mainly from identical sales growth, and an underlying retail operating margin of 5 per cent, during 2011.
At current exchange rates, Ahold expects its net interest expense for this year to be in the range of €230m-€250m and its capital expenditure to be around €0.9bn.
