(9,37 EUR, -0,68%) will present an update of its strategy today. A press release gave already on overview of the six pillars that are designed to accelerate growth.
Six pillars:
- Increase customer loyalty and drive identical sales growth. customer loyalty and drive identical sales growth. New customer loyalty initiatives planned to add 1-2% to identical sales growth.
- To broaden the offering by further developing and rolling out successful store formats, expansion of the online business and to increase own-brand penetration. Goal: 40% private label penetration in the US. Ahold’s online businesses are already the number one online food retailers in the Netherlands and United States. They plan to triple online sales to € 1.5 billion by 2016. In early 2012, they will begin testing pick-up points in both Europe and the United States that allow customers to order online and pick up their groceries themselves from designated locations. Note that Delhaize has been doing this successfully in Belgium through Delhaize Direct.
- Geographic expansion. is exploring opportunities to grow the business in and around its current markets in the United States and Europe. They are planning to open at least 150 new convenience stores in Europe, and a minimum of 50 supermarkets in Belgium in the next five years. At the same time they will continue to look for opportunities to expand into new geographies.
- By leveraging skills across the group, will further simplify the business, drive sales and reduce cost. A new € 350 million three-year cost reduction program was announced this morning. Note that € 350m additional cost savings represent 1% of revenues.
- Responsible retailing.
- A focus on talent.
In addition to the above, announced that the pay-out ratio will increase to 40-50% of normalized net earnings. DPS is therefore set to rise sharply.
Conclusions:
The press release doesn’t include any earth-shattering news. All eyes remain on the € 2.5bn gross cash position and external growth plans. The € 1bn share buyback program and increased dividend ratio will use up some of the excess cash but investors are waiting for a step up in expansion. This will have to come from acquisitions. Entry into new markets entails risks of course. We nevertheless maintain our Accumulate rating and € 10 target as the stock continues to trade at attractive valuation multiples. Moreover, the company reported comforting 3Q11 results last week with market share gains in all of the group’s major markets.