Koninklijke Ahold Delhaize N.V.

Henk Jan ten Brinke – Senior Vice President-Investor Relations Dick Boer – Chief Executive Officer Jeff Carr – Chief Financial Officer

James Grzinic – Jefferies James Anstead – Barclays Bank Edouard Aubin – Morgan Stanley Jerome Samuel – HSBC Xavier Le Mene – Merrill Lynch Bruno Monteyne – Bernstein Andrew Gwynn – Exane Sreedhar Mahamkali – Macquarie Cedric Lecasble – Raymond James Nick Coulter – Citi

Thank you, operator. Ladies and gentlemen, good morning, and welcome at our Q1 analyst conference call and webcast.

I'm here with Dick Boer, our CEO; and Jeff Carr, our CFO. And after a brief presentation, we are very happy to take your questions.

So with that, please over to you Dick.

Thank you very much Henk Jan, and ladies and gentlemen, also good morning from my side, and welcome to our first quarter 2017 results conference call. We are pleased to report a resilient first quarter with increased margins despite the ongoing deflationary environment in the United States.

Pro forma group sales grew by 0.6% at constant exchange rates and also impacted by the timing of Easter. Deflation in the U.S.

was similar to the previous quarter but we expect our sales performance there to improve in the second quarter. We are fully on track with the integration and see strong synergy delivery.

EUR 56 million this quarter, resulting in an increased operating income and a pro forma underlying operating margin of 3.8%, up 20 basis points compared to a year ago. Free cash flow is strong, close to EUR 200 million for the quarter with increased capital expenditure compared to last year as we continue to invest in key channels and our businesses.

We reiterate our target of EUR220 million net synergies for 2017 and expect an increase in full-year operating margin compared to 2016. Let me give you a quick update on where we are on delivering our net synergies.

On the next slide, you can see most of our negotiations with A-brand suppliers have now been finalized and we're comfortable with the outcome, presistent with our targets. Let me give you a few examples.

For the global personal care, A.brand supplier, we've identified condition differences between the former Ahold and Delhaize brands, the harmonized conditions, which resulted in a synergy of EUR 2 million. Further A-brand supplier for beverage as we identified 2.5% condition differences on a comparable assortment between Delhaize and Ahold another synergy of EUR 1 million.

The sourcing of non-branded products, private brands in fresh discussions are ongoing in the United States and have also commenced in Europe. Another example by just combining volumes in negotiating terms for pork meat transition in the United States, we already saved $1 million a year and this is just one category.

The process and outcome for other fresh categories in the U.S. was similar.

Not For Resale expenditures savings are occurring inline with expectations a few more examples the lining self tech attributes in the United States between new brands resulted in efficiencies with a synergy value of $2 million a year. As not just the United States, but hence its aligning leap with paper specs between Ahold and Delhaize resulted in an annual saving of EUR 7 million.

The integration of the two corporate headquarters has been finalized also contributing to the synergies that you can see on the slide. And finally, we made good progress with building our retail business services organization, combining and integrating back-office and support functions for all brands in the United States.

Now let me hand over to Jeff, who will take you through the number in greater detail and I'll be back to you with some business highlights in the quarter. Over to your Jeff.

Thank you, Dick, and good morning, ladies and gentlemen. Building on our strong performance in 2006, as Dick mentioned, today we represent an encouraging start to 2017, a strong synergy delivery, higher margins and resilient sales.

A short word of warning, today are largely be discussing pro forma numbers, although in the interim reports you see both IFRS and pro forma data and I trust you’re becoming familiar with this and it won't cause any confusion. So as Dick mentioned, and I am on Page 4 of the presentation.

Net sales were up 0.6% at constant exchange rate to $15.8 billion. And obviously one of the key issues in the quarter is the deflationary environment in the United States, so our rest assured, I'll come back to that little later in the presentation.

EBITDA margins increased by 20 basis points to 6.7%, an underlying operating profit margins were also up 20 basis points to 3.8% with underlying operating income up 8.1% to EUR 604 million. Now, I will go into a little bit more detail by the segments in the next charts, but basically in summary the synergies are EUR 56 or equivalent to around 35 basis points of margin improvements.

In the quarter, we delivered a margin 18 basis points ahead of last year. So effectively, we've lost 17 basis points in our base business due to a number of issues but mainly due to the deflationary environment in the United States.

In the first quarter, all else being equal, we have the normal ups and downs in the quarter. We have an accounting impact in the Delhaize America, offsetting this, we have very high comparable numbers at Ahold USA in the first quarter last year also.

We have a strong Netherlands performance and a slightly weaker Belgian performance. But the key news is that we all seen the synergies delivered to the bottom line, resulting in margin gains, while maintaining our competitive market position and delivering on our resilient sales growth performance.

So moving on to the segments, starting with Ahold USA. We see net sales down 1.4% with constant rates and comparable sales down 1.8%.

With deflation running in the first quarter of 1.3%, minus 1.3% which is comparable with the fourth quarter of last year. having said that, deflation - the trend on deflation, we actually saw an increase in deflation early in the quarter.

specifically with produce prices is significantly down. However, we saw a distinct movement with less deflation towards the end of the quarter and that's a trend we also saw at Delhaize America segment.

Comparable sales at Stop & Shop, New England were relatively strong in the quarter, while at New York Metro remained affected by the A&P closures in 2016. This effect will be annualized – we'll see the annualization really during the second quarter and therefore won't be impacting results in the second half of the year.

The calendar effect of Easter at Ahold USA brought a negative 50 basis points of sales performance in the quarter and obviously, we'll see that back in the second quarter. And I hesitate to mention weather but the mild winter conditions certainly creates an adverse sales environment versus last year.

Underlying operating margins were actually down 10 basis points versus last year. However, in absolute terms, 4.2% operating margin, the result this quarter is a very good performance.

The anomaly really is last year's first quarter, which at 4.3% was exceptionally high, mostly driven by those weather events that I talked about last year. Compared to 2016, the total margin that we achieved at Ahold USA at 4% in 2016.

Margins in Q2, Q1 are actually up 20 basis points in total. And so, if we exclude the synergies, that would imply that our base business margin is actually down about 15 basis points.

Next is American net sales at constant exchange rates and comparable sales were basically flat. Again the calendar effect of Easter had a negative impact around 40 basis points and deflation was negative 1.7% in the quarter, again, comparable to the fourth quarter last year.

And as I mentioned, that's a similar to – we saw a similar trend in terms of progress through the quarter as with Ahold USA with less deflation – or deflation lessening towards the end of the quarter. Taking these factors into account, I think we -- you agree we achieved a very strong volume trend in Food Lion and Hannaford, which is a commendable performance, certainly in relation to the peer group in the East Coast.

Underlying operating margin in the quarter was 3.9%, and that's 46 basis points ahead of last year. Now included in the results this quarter is a change in accounting treatment, which impacted property taxes, which resulted in a EUR 15 million benefit this quarter compared to last year.

This is in line with the Ahold Delhaize in the previous Ahold accounting policies where we previously – where we charged the property taxes over the full year where previously, at Delhaize America, they were expensed in the first quarter of the year. This change has no impact on the full year of 2017.

So excluding this impact, the Delhaize America margins were up around 10 basis points versus last year. And with benefit of synergies partly being offset by the impact of deflation and some higher labor cost in the quarter.

We'll go on to the Netherlands, sales were up 3.9% to EUR 3.3 billion, and comparable sales grew 3.3%. Service growth continued to be strong in our supermarkets and our online business in ah.nl and bol.com continued their strong performance through 2016.

Underlying operating margins increased by 30 basis points to 5.0% resulting partly from synergies plus our own continued cost initiatives which we continue in all of our businesses as usual. As mentioned during 2016 full-year, the slight negative impact on margins due to the higher pension costs in the quarter which are consequences of all lower interest rates.

Excluding Bol, the Netherlands margins were 5.6%. So the dilutive effect of the impact of Bol in the quarter was 60 basis points.

Now moving onto the next chart, it shows our Belgium performance. Net sales decreased 1.1%, our comparable sales were down 1.6% mainly due to a decline in the volumes that are integrated supermarkets – the old supermarkets.

Nonetheless, the affiliate stores continue to perform well. The underlying operating margin was 2.4%, 10 basis points lower than last year, mainly due to a decrease in sales, our sales deleveraging and partly offset obviously by the benefits coming in at profits in earnings.

Finally on the segments, looking at Central and Southern Europe, we reported net sales growth at 4.4% at constant rates and comparable sales [indiscernible] of 1.6%. We have particularly strong performances in Romania and Serbia.

And in Greece, whilst we grew our market share, we do see a slightly negative comparable sales following the exceptional growth last year and the fact that the market is normalizing with the competitive position back in the Greek market. Underlying margins slightly decreased in Central and Southern Europe 10 basis points to 3% – 3.0% from 3.1% last year with margin improvements being shown in Czech Republic and Serbia and slightly offset by a slightly lower-margin in Greece.

So now, let me move on to free cash flow. As you can see, I'm pleased to see a strong free cash flow in the quarter.

Now on this page, we don't actually talk about the pro forma numbers, we're looking at cash, I like to deal with real cash. So these are actual real cash numbers, which is slightly different from the pro formas, not a big difference in this quarter.

Total free cash flow in the first quarter of last year, 2016, was negative EUR 26 million when adding the Ahold and Delhaize reported numbers together. And this quarter, we achieved EUR 197 million positive free cash flow and that's an increase and improvement of EUR 223 million.

As you can see, big contribution came from improvements in net working capital which we see in the quarter. I'm especially pleased with the improvement in free cash flow as you can see, we also invested more in the quarter with an additional EUR 85 million of capital when compared – capital expenditure compared to last year.

So now, I'll shortly just repeat the outlook before handing back to Dick. In the United States, we expect in the second quarter an improvement in the sales performance.

As we said before, to operate in a slightly inflationary environment in the second half of the year. We confirm our targets for 2017 of realizing EUR 220 million net synergies, including EUR 22 million realized in 2016.

And we expect full-year underlying operating margins for the group to improve compared to 2016. Finally, we expect free cash flow for the year of 2017 to be EUR 1.6 billion and that’s after EUR 1.8 billion of capital expenditure.

So thank you. Now I’m going to hand back to Dick.

Thank you, Jeff, and we'll take you to some of our business highlights today that are driving our performance in the first quarter. We're here to talk what our businesses are doing to continue to be competitive and also grow the business where possible in the markets we operate.

So look at the Ahold USA first of all, we are improving on a continuing basis as you can see the Fresh offering and we said it last year, we focus on all our Fresh departments over the last couple of years. But for instance, what you see now is also more local.

We grow locally with bright farms, local and full year around sustainable grown products and that's a unique concept, which we are expanding now into Giant-Landover and Giant-Martin markets. Where we've focused is that over the last year is a lot on our Fresh departments like the food and veg and bakeries.

We're also now are working on our, what we call, Heading Northeast program on the Center Store. There are groceries, health and beauty, bath, baby, natural and organic and specialty departments.

We're optimizing our product ranges and we look at our space allocation per store to match local needs and provide a distinct offer for our customers. That's really working on improving the Center Store offer for our customers.

The third point I would like to mention is, following our price reduction in the fourth quarter last year, we continue to see both on our price positioning as well as our price perceptions scores to improve across our brands. But also here the – journey continues.

As part of our better strategy, we continue to save costs in the business and invest it back into our customer proposition providing quality and value in our local markets. Staying in the United States, we're now looking at the Delhaize America segment.

We see that Food Lion continues a strong venue this quarter and maintained its competitive price position versus the major competitors. As we already announced, we are currently implementing Foods Alliance Fresh and Affordable initiatives in the Greensboro market, where we operate 96 stores and we'll roll-out Easy, Fresh & Affordable in the Richmond market in the second half of this year.

Offering Food Lion customers great quality at competitive price in fresh and attractive stores, we believe we are well prepared from new entrants in our markets. Also, at Hannaford, [indiscernible] remains strong this quarter reflecting strong customer loyalty best built on its high customer service.

I'd like to go to the next slide. It's about our Dutch and Belgian business.

In the Netherlands, we started our own social channel on YouTube called Appie Today, a new and interactive daily television station which programs made by and made for customers and associates with food trends, tips and entertainment and in and around our supermarket. It makes us even closer to our customers because it's our true story.

So our associates, our customers and our suppliers. And since its introduction, in February, it had one million views already.

One of the key channels for our Better Together strategy not only supermarkets online but also smaller formats. I would tend to go is a great example that continues to do very well.

The latest format is being implement in more and more stores and it's impressive suite of bringing a new and innovative products on the shelf is the best practice within the group. This quarter, we completed also our very successful campaign wherever our customers could save for high-quality cooking pans.

During this campaign, we sold more than three million pans in the Netherlands. Let's go over to Belgium.

In Belgium, Delhaize launched our GoodCook workshop with school kids to promote healthy eating. Our Belgium customers and associates are celebrating Delhaize 150th anniversary with a special range of private label products and donating to the Make-A-Wish program for Citgo, very important community engagement, again, of our companies around the globe but this is a great example of it.

Remembering our store base is moving according to plan. With 17 store refurbishments completed this quarter and 120 total planned for 2017 both affiliates and company-owned stores.

We are considerably shortening the period during which the stores refurbished by closing the store only a few weeks instead of keeping it parting out for months while their focus are taking place. Another example of best practice sharing between the Netherlands and Belgium, and saving costs at the end of the day.

I will share a few highlights on the next slide, which is our Central and Southern European business. In Greece, we had strong promotions and gained market share in a contracting market partly also by a deflation environment, while we now see competition strengthening and getting into better shape.

You're all aware, Marinopoulos group is in the combination of class its reopening their stores again. And all within the Czech Republic, we successfully launched a phase of Czech campaign, introducing a new private label range in cooperation with local suppliers that can really the pride of the country.

In Romania, our fastest-growing store network currently, as you can see, we opened our 300 Shop & Go store, that's a smallest store concept in Romania where we have total already more than 500 stores, as you know, we continue we’ll open more to come in the later this year as well is in the supermarkets as the Shop & Go stores. Serbia sales benefited from its super large campaign, promoting healthy and tasty meals for kids at our Maxi stores and finally, a few words on our fast growing online business.

[indiscernible] continued strong sales growth. It also won a very great award for best online grocery store of 2017 in Netherlands.

You see how appreciative the customers are about our performance in the veg market as our food online. At bol.com, our plant at sellers platform so consumers sales growth of more than 60% maybe also good to mention, net consumer sales in Belgium grew by more than 40%, we really making the intervals in the Belgium market, that presents now 20% of total bol.com consumer sales.

We are we're pleased to see that people at our U.S. online grocery business show them improved operational performance in terms of order completeness and timeliness of delivery.

Also, our Podcast subscription service is driving order frequency is a minimal impact on order size. And although I mentioned already Hannaford, most left by their customers, it added also the35 to go pickup point, service that is appreciated by our customers in that market.

I'm going to the last slide, the wrap-up of today before we go to our Q&A. We are pleased with the resilient first quarter performance in a deflationary U.S.

markets. [indiscernible] after the merger, the integration is on track, we see strong net sales delivery, which mixes comfortable on our targets.

Despite the headwinds in the United States, we increased margins for the group, driven by synergies. We reported a strong free cash flow for the quarter, as Jeff mentioned, with increased investments in our stores.

We expect to see an improved sales performance in the United States in the second quarter with some inflation returning in the second half of this year. We expect to increase our full-year pro forma underlying operating margins for the group compared to 2016.

And with that, ladies and gentlemen, I would like to open the lines for questions.

Good morning, team. I’m surprised the management [indiscernible], I will have my question.

There seems to be a little bit of a disconnect between the comp store that you reported for the U.S. and your guidance for the full year and I presume you're seeing sequential improvements to give you that confidence.

Can you perhaps expand on that a little bit in terms of what you've seen towards the end of the quarter in the U.S. in terms of comp store and the deflation impact in perhaps in more recent weeks since the start of Q2?

Thank you very much.

Thank you very much, James. On the comp store sales of the United States, I would refer also back to the point we made is of course whether has a more important impact this quarter versus last year so that's the quarterly impact for this year for the winter impact Easter of course and the inflationary, your question, we started the year still with more or less similar trends that we seeing in the fourth quarter but a bit easing in the last bits – or last weeks of the quarter, that gives us some confidence also what we said that it might come back and that's what we slightly think also, slight inflation back in the second half and that should give us the confidence on our expectation for the year.

I’m presuming that’s trying to continue in the past five weeks I would guess.

Yes, we continue to see an improvement in the trend. We continue to look at the forward indicators in terms of future prices and we feel relatively confident that we will see sales come back into the system.

Obviously the challenge is inflation. Inflation comes back, passing that onto the customers is a different challenge, but at the end of the day, that's a normal in the cycle.

So we saw an improvement in the situation, actually during the first two months of the quarter, we saw produce deflation impacting and actually getting worse than the fourth quarter, but we saw that easing off quite significantly in the third period. And yes, the trend has continued into the first period in the second quarter.

So the trend is quite significant and I think you'll see it coming from other U.S. retailers as well.

That’s very clear. Thank you.

Good morning. It’s just one question, probably for Jeff.

You mentioned that in your comments excluding that synergy benefits in the first quarter, margins in the core business were probably around 17 basis points, but of course that was affected by the deflation deleveraging in the U.S. and presumably the high starting point of the U.S.

margins in the first quarter? So my question is basically, are you optimistic that for the year as a whole, margins in the core business might be done less than the 17 basis points impact you're seeing in the first quarter?

Well, we said that the main driver of the margin being down was the deflationary effect. So if the deflationary impact goes away, then we'd expect to see an improving situation.

I mean, that's basically just a different way of saying exactly what I said. So yes, we would expect to see that.

We said all along, we expect the synergies to come to the bottom line. I think in this current first quarter environment, seeing 50% of the synergies in the bottom line is a significant achievement and one which we should be reasonably pleased with.

If it's a challenging environment and you've seen other – our peers reporting numbers, and I think – as things improve in the second and third quarter, we should be back into the position where we are able to drop more of the synergies into the bottom line.

That’s helpful. Thank you.

Yes. Good morning.

So three quick follow-ups from me. The first one on the negative like-for-like in the U.S.

in the first quarter, just to be clear, the minus EUR 1.8 million is basically driven by input costs deflation, and you have not seen any increase in the deterioration in the competitive landscape? Related to that, could you please comment on your market share trends in the U.S.?

I know Nielsen provides you market share on the market-by-market basis. And finally, on bol.com, I think you know, Jeff, extrapolating your comments in the first quarter, it looks like the EBIT loss for bol.com could be around EUR 25 million for the year.

Could you give us a sense of how did the shape of the losses could evolve over the next two years, three years, what you have in mind?

Okay. Maybe I’ll start with the bol comment.

You're right, in terms of your extrapolation that gets us to around that number in terms of EBIT. At EBITDA point obviously bol is pretty much break even, should be neutral.

And from a cash flow perspective, bol continues to contribute to the group. And I've said this many times, that the shape of the development back to profitability to some degree depends on the investments we make to sustain the growth and we continue to see a 30% type of growth rate.

As we still see potential to significantly grow the bol business, we'll continue to make the investments necessary. So when we started this process, if you recall back to I think it was 2000, the team that acquired bol – when we started this process, bol was profitable, but only growing about low-teens in terms of growth rates.

The investments we've made I think are very clearly controlled and identified and we could adjust at any point, there are investments in marketing, awareness; investments in people in terms of web development; investments in areas such as increasing awareness across the new categories. And we feel confident that we could adjust that at the appropriate time.

But as we stand today, we’ll continue to invest in growth and I wouldn't commit to a particular point in time where we see break even on an EBIT level or even profitable EBIT. I think that’s just depends on the equation with the growth that we see coming through from bol.

Your question on the U.S. markets, we've seen, of course, a deflationary impact, at the same time, also contraction of the market in the U.S., certainly on the Northeast.

Mostly weather-related, which clearly had an impact last year versus this year. So if you then look at market share, your other question clearly, we gained again slightly of course, in this market because we have good market shares already in the U.S.

markets of the Ahold Delhaize; market share as well as in Ahold that’s just about in foods. So it seems to be that, let's say, the market contraction is more impacting, at the same time, with the deflation and the weather impact for the first quarter of Ahold USA.

And as we said also and Jeff said that you see in the period – at the end of the period, a rebound of having a deflation to a slight deflation environment and that should also bring some sales back into the market as you understand.

Yes, go ahead.

Yes, I was just going to say. I think what you're asking is also if the 1.3% deflation in the USA and the 1.7% deflation that we see at Delhaize America that’s related to input costs or if there's any competitive action in there.

And I'd just repeat that, it's mostly – almost all, in fact, related to input costs, gross margin remains pretty aligned. We don't see a big gap between the deflation and the input costs.

And in the competitive situation, we didn't see any major pricing action in the quarter. Obviously, at the competitive market, we see promotional activity but we didn’t see any major changes in the price position from any of the key competitors.

So apart from the New York market, you would say basically, your market share is flat to slightly up basically.

Slightly up, yes.

Okay, great. Thank you, guys.

Yes. And that’s clearly – while we’re taking some still market share, even in New York markets, by the way, so it’s also there, the contraction of the market which has an impact and we are rebounding of course more openings of some other food stores in the New York market.

So that’s one of the impacts we see in our development.

Okay, thank you.

And as I mentioned in my intro, we expect that A&P kind of affect to be out of system by the end of the second quarter.

Okay, thanks.

Yes. Good morning, everyone.

Three questions, please. So first on synergies, can you give us the split of the EUR 56 million you also mentioned in Q1, is it a about two side direct sourcing?

And regarding the synergy, now that you have the full extent of that between Ahold and Delhaize, do you see further opportunities? Not only regarding lot of sticky in the U.S.

And finally in terms of online contribution for the different banners, can you give us the like-for-like x online perhaps of the different banners and is it fair to assume that Albert Heijn ex-bol.com is about 1% like-for-like? Thank you.

Let’s talk with the synergies. If you look at the slides on Page 3, we showed you the United States and Europe and the split in G.I.

Joe, so 56,350,000 was coming from the U.S., 15 million from Europe, globe support of 6 million and that gave us EUR56 million for the total of this quarter, which is, as I gave some examples, first of all, this is coming mostly from A brands negotiations and we are very pleased with the results coming out of that. So in your second question, you also raised said time, are we seeing more synergies, what we plan to do is in the second half to – the second half results, talk more about synergies as we have done almost a year.

And yes, it will be a year of the merger so I’d get some more updates around synergies at that time and the development of that. On your – you mentioned a couple of things and let’s take the opportunity, again, also on the logistics because sometimes some misunderstanding on how we handle logistics in the United States between Ahold and Delhaize.

And of course, we are working also what we can and how we can share. Ahold has outsourced a part of their logistics, Delhaize owns their logistics and that we outsourced logistics has not changed, by the way, but sometimes there’s a misunderstanding that the same supplier who is our logistic supplier is also doing our buying.

That’s clearly not the case. We own the buying relationships, it’s all our suppliers as well as in Delhaize as well as Ahold USA, and we outsource some of our logistic activities and that’s still can lead to a significant synergies if you can benefit from the combination.

We haven’t worked on that now because we need first to work on all kind of other things but there’s clearly no, let’s say, restrictions in working on synergies between the 2 companies in these areas. And maybe the word significant is misleading, but there are synergies possible, of course, and the situation between the use of C&S of our own logistics is not limiting us on that.

So I think I take the opportunity also to clarify that.

Yes. So let me just comment on the last part of the question, on the sales in the Netherlands.

Excluding bol, I think sales – comparable sales were up 2.2%. Now that includes the Albert Heijn business, including the Albert Heijn online.

So supermarkets will be slightly lower than that. But excluding bol sales, the Netherlands were up 2.2%.

Okay. Thanks for that.

Yes, good morning. I’ve questions, if I may.

Just the first one coming back to actually Jim’s question and prospects for the margin. Most specifically, in the second quarter, you’ve got potentially area comps in the U.S., you’ve got Easter, you’ve got also easing deflation so is it safe to assume that before synergies, your margin should improve in the second quarter so that’s my first question.

The second one is about Q1. As you invest more than what you expect in Q1 in terms of pricing or deflation, so as you said, it’s not competition-driven but more input-driven, but what it was and what you’re expecting were in line with your expectation in Q1?

And last one, can you talk a bit more about Belgium, what are you going to do to include the performance with your own stores because it’s unlikely – the sales are lagging and certainly not what you were expecting to be. So what is the plan in Belgium?

I will leave to – first to Jeff, let’s take the Belgium. On the Belgium side, as we express in our call this morning, you see clearly a development different between our integrator source and our affiliates.

We are, let’s say, trying to understand better what the real difference are because it’s using this and promotional campaigns in a way. So that’s one.

Secondly, in general, of course, we see our growth is still very limited in the Belgian markets. So we also if you – our commercial proposition from a pricing and promotion point of view, a lot of the things this team already have done over the last couple of weeks, I would say, is stepping up the promotion, more aggressive front pages.

So we need to attract our customers in the stores and then of course also expecting that they would sell more at the same time so that the markets could start increasing. It’s too early to comment on that.

Just the first start, of course, we went through a big transformation plan in Belgium, with a lot of changes in the stores, that’s another area where we need to work on. What is the effect on that and what is the, let’s say, the mobility of people in the stores come how we can also improve the service to our customer of the integrated stores, how we can also improve the service through our customer of the integrated stores.

Maybe if I can come back to the margin question we had at the beginning?

Yes. Look, I’m not going to get fold into quarter by quarter margin guidance, but I think we’ve been very clear in what we said, in principle, that the EUR 220 million synergies will, in principle, fall to the bottom line.

We sold out 50% of that in the first quarter, which was absorbed into a very tough deflationary environment in the U.S. We’ve said that the deflation should be basically out of the system in the second quarter with a slight inflation in the market and that trend will obviously show aligned through the second quarter.

But we’ve been very clear in terms of guidance. We have the consensus numbers we’ve now published on the website just for clarity, which we think is good practice.

We at Ahold haven’t previously done that, I think the Delhaize team has been doing that and we’re certainly comfortable with the consensus numbers. They’re on the website.

So I’m not going to really get pulled into more detail quarter by quarter estimates. In terms of the deflation in the first quarter, I’d say it was in line with expectations.

I think what we saw in the first few weeks of the quarter was produced deflation actually getting higher than we expected. However, that eased through the quarter in where we came out, the overall improvement in the deflationary numbers and basically the March period, the total quarter was pretty much in line with expectations, which was pretty much flat on Q4, which is what we expected.

So yes, I’d say overall, it was in line with expectations and you’re right, just to reconfirm, the deflationary impact was – the vast majority was driven by input costs deflation and, yes, I’d say it was pretty much in line with expectations.

Okay, thank you.

Good morning. A few questions for me is bfresh, which was [indiscernible] convenience in the U.S.

was launched a little while ago. Is there any progress or update on when you’ll be able to get any meaningful number of stores of bfresh launch?

Or should we still thinking about that? The second one is on the synergies, I mean you delivered EUR 56 million of synergies annualized across the year over to be above the EUR 220 million.

Is that because you’re planning to invest some of that, the activities? Or are you sort of setting up for delivering it earlier than planned?

And the third thing is on Belgium, what kind of timeframe should we have in mind for a stabilization of the margins or possibly a recovery of the margin in Belgium once you going through all the work on the integrated stores?

Thank you, Bruno. I will start with the bfresh.

As you know, we’ve tested a couple of stores in the Boston and Philly market. We clearly found out that the test and the, let’s say, the first start of the bfresh was up let’s say bringing the sales per square feet which we wanted, so we adjusted the concept, we’re now clearly stepped up also the recent opening of the store, which is to do much better and more pro forma than we were expecting or that we are expecting should more in line with pro forma of the expectations.

We haven’t decided anything at this moment on the rollouts. It’s a testing ground at this moment.

On the concept as you know, Hannaford had also opened smaller performance on what we do now and a combination of – look at what other learnings we have from both sides. Although, I think the bfresh was more urban-related where the Hannaford’s smaller store is more rural-related, but soon I hope, somewhere in the second half this year, we’ll decide how we continue to rollout smaller stores in the U.S.

market because it’s clearly for the markets and nice opportunity for us. So no numbers at this moment.

I think bfresh learned as a lot, the first bfresh is clearly were two or three – maybe too cool, at the end of the day, for our customers. We rebounced back, I think the stores, which we have now, the store format we now have opened is a bit more basic back also dragging more sales and that could be helpful.

On the synergies, maybe, Bruno, the run-rate, you’re right it’s already at a pretty high level. We said, I think, in the last update, that we would see that evenly spread application of synergies across the quarters.

Certainly, if we get confident that we we’ll exceed the number, we’ve talked about reinvesting any surplus back in the business. We already have significant organic business as usual cost programs running in the U.S.

and in Europe, which we are using to reinvest back in the business. But if synergies deliver more than the number, we will look to reinvest.

I think we’ll give you a much broader update on that subject with the second quarter. I think this is the first real quarter of synergies coming through so I would expect that we’ll be able to give a much more detailed update on the synergy arrival at the level expectations in the second quarter.

Just coming back to the earlier question on the sourcing synergies, it’s about 85%, I forgot to add that point, it’s about 85% in the first quarter coming through outsourcing and the other 15% from – basically G&A-type of activities.

Do you want to comment on the Belgian margin, Bruno’s question?

No. I can’t remember what the question was about.

We had a question on the Belgian margin. What I understood from here is where you are today, of course, there’s the Belgian line and what are we expecting going forward after all the work has been done in Belgium.

I think, it’s too early to say, from my point of view, I know that, in the past, the Transformation Plan should have – we’ll have given a guidance for the future on Belgium but I’m looking to leave it is that.

I think we continue to see the opportunity in Belgium to deliver margins more in line with historic rates, which is certainly north of where we are today but I don’t want to get into specific guidance on the timing of that. I think we’ve talked about the commercial proposition needs more work, we need to address the issues within the integrated stores, which are clearly underperforming the affiliate stores which is a combination of operational and commercial activity to get the margins back to where they need to be.

We have a great business in Belgium, it’s a great brand and I’m sure once you go through that program and put the right actions in place, we’ll be looking at much better margins in the Belgium market.

Thank you.

Yes. Good morning everybody.

Let’s go to – want to be greedy. Just go to the synergies, I think, Jeff, you said second quarter the earlier, you said second half just in terms of talking more about the synergies.

So could you just clarify when that would be? That’s the first question.

The second one, it’s also easier to cut prices than it is to raise them. When we’re thickening about the market moving back towards slight levels in inflation, is that mostly about base effects or is it the case of some of those cost decreases are now becoming cost increases?

And as you’re looking to pass those through the shopper, are you observing any stickiness in the U.S. market?

And then the third question, we’ve not talked about it for a while, but the wage inflation down in the Delhaize America business, you’ve seem to have a little bit of wage investment this quarter. I’m just wondering where you are versus the market.

Obviously, Walmart have a pretty significant wage increases so maybe just referencing where you are in the sort of dollar-per-hour basis.

Okay. Should I kick off just on clarity on the synergy update, we’ll give a more detailed update on the Q2 results, that’s the intention.

And I think that’s a question you were asking?

Yes, that’s right. I just figured that the second half or the second quarter.

Okay. On wage inflation, what we’ve said is that we’ve seen, for example, on minimum wage increases in 2017, around about a EUR 50 million impact in terms of minimum wage increases, and that’s one of the key drivers in 2017 in terms of wage inflation above and beyond the normal noise.

That’s in the AUSA business. We’ve got a program in place, which largely offsets that that program includes capital investments and things like automated coin counting and things like that which take a little hours out of each store.

There’s also a program at the DA business to try and offset some of those impacts. But for sure, what we’re seeing is that’s going to come through more in the second half than in the first half where we look to effectively improve the efficiency of our labor through various programs including scheduling and looking at things like self checkouts, improving the self checkout processes.

So all in all, I think that the inflation that we’re seeing is manageable. The number that I threw out there that we’ve seen as an incremental number is the EUR 50 million coming through from the minimum wage increases.

And I think on the pass-through, with the cost, Dick…

Yes. I think it’s a fair comment Jeff also made in his overview of the expectations for the second half that we return to inflation this point.

And I think that’s a general comment, are we able then to reverse from a deflation environment to pass through the inflation? That could take some time and that’s why I think we made that caveat.

On the other hand, we went inflation numbers although, you we’ll see it’s easier to pass it through that we have spikes and we have seen that in the years ago that we have spikes in inflation, and then it was difficult to passing through. When it goes slowly and at regular increases then there is, let’s say, there is the price of stickiness maybe of some competitors stay on, but everybody is looking and I’m sure all competitors are looking to pass some of the inflations through to the customers to come back to the healthiest situation of the market which is around 1% to 2% of inflation.

And it depends on the competition as we all know. So, we will move forward in our business also to see how we can pass this through to the customers.

Okay. That’s all very good.

Just on the wage rate in Delhaize U.S. wondering if you could give that to us.

I don’t have an hourly rate in absolute number that I can throw out to you but as I said, the general increases that we’ve been seeing in 2017 have been in line with the normal patents and we don’t really anticipate further increases in the base wages in the near future. But basically at certainly a line – the minimum wage items that I mentioned mostly affect kind of in the AUSA business.

So I don’t have a rate that I could throw out to you, let me look into that and I’ll come back to you Andrew if we’ve got something.

So the answer is competitive. Okay, thank you very much.

Three questions for me, please. The first one is just in terms of – any insight you can share with us regarding the new competitors on the key Food Lion market, if you can talk about your preparedness there in those markets, convergence, that would be helpful.

And second one is, you can paint a picture of modest inflation in the second half, can you then say if that is enough for you to have stable underlying operating margins from a year ago basis, is that right to think along those lines? And third one, you talked Delhaize USA volumes being positive, I’m not sure if you commented on Ahold USA volumes?

That would be helpful if you can comment on that. Thank you.

Okay. On the new competitors coming in, or a new competitor coming in, I would also paint a bit of picture of course, it is of course a well known competitor on the other hand in the markets where this competitors comes in we are used to get competition over the last couple of years.

And to give you maybe some perspective in – so mainly you're addressing of course in Food Lion area, the perspective on the last few years of mostly neighborhood stores of Walmart coming into that market. And seeing that the Delhaize Food Lion business continued to grow on a comparable way from a comparable numbers in growth, that means that we are able to offset the competence – competitiveness in that market.

And this is just to mention the 100 stores, the same you've seen with specific competitors coming into this market. So we are ready and we have improved over the last few years that we're offsetting that our plans and action plans.

Of course, easy for us in affordable strategy, I supported this and will support this to continue. What we do to prepare ourselves for the upcoming competitor coming in is also as we know where the locations are to be ready with our stores.

If they were fitting already in the schedule of remodeling, there will be a remodel according for the new Easy, Fresh & Affordable. If that's not fitting into schedule, then it will be done later, but we will add some of the features off Easy, Fresh & Affordable already in the stores.

Think about deli, think about bakery, think about the better produce improvement and ranges you can add even without total remodeling of the store. The third area is also service.

I think some of the areas you also kind of add and when the stores will be open. And remind you also, we're talking about 20 to 30 stores in our market areas before summer.

We're not talking about hundreds of it. So this is still a very limited number and, of course, every competitor will be seen and will be taken also by with a good effort from our stores to defend our proposition.

And that's why I used also the example of the last few years in the Food Lion business how resilient we were with our comparable sales store growth.

Just on the question of operating margins and inflation returning and the stable margins for the base business ex-synergies, what I'd say is over the last 3 or 4 years, the AUSA margins are our focus on because there's been more activity, more initiatives that's being put through in Food Lion, for example, have been relatively stable around 3.8% to 4%. I consider that range stable by the way.

I think movement from 3.4% to 3.9% or to 3.84% is just normal variations around the business. The margin, excluding the synergies for Q1, was certainly still in this type of range.

And that's in a difficult market with deflation. So the business model, which I've discussed in normal markets is that we should see relatively stable margins, we manage our cost initiatives to fund our journey Northeast, for example, our activities, our competitive activities and that's clearly a large part of our strategy in terms of going forward.

So the answer – short answer is yes, with the return to inflation, I expect the base business margins should remain relatively stable and, I'll repeat, and then we should see a higher percentage of the synergies passed through to the bottom line in terms $220 million. And obviously, if the synergies exceed that, then we will look to reinvest further where necessary.

So I think we're being very clear on that. You mentioned AUSA volumes, yes, I mean, obviously, the comparable sales are down 1.8%, the deflation we quoted was 1.3%.

So the effect of the weather – the calendar change, the A&P cycling in the AUSA market means it was slightly down on volumes in the first quarter, but having said that, we expect certainly the weather FX to not be impacting Q2. We see the positive effect of Easter and – whilst A&P will still be annualizing in Q2, we see that coming out of the system in Q3 within a return to the inflationary environment.

But in the first quarter, a slight volume down in terms of AUSA and is correct.

That's very helpful. And just going back to my first question, do have a clear kind of line of sight where these small number of stores coming up?

Do you have any Food Lion stores in those attachment areas?

We know exactly where they come. We have all the locations in the spot so we know exactly when will they come, and we are prepared.

And we expect to open 20 to 25 before summer in our territory – on the Food Lion territory. So we know what's coming up and we also know, let's say, from a conceptual point of view, there will be a bit larger stores than normal.

There are also rumors that they might build them larger but not have the store fully equipped on the full assortment but all of rumors and the other thing we see eye open in the first one of course, we will face it and we'll be ourselves and because everybody was of course interested to see what they're going to do. And let's be clear, so we mentioned also in the morning call, all these since the 70s already.

It's of course an entry of a new competitor. But if you see that it's not the first one coming in with these kind of concepts in the amount of market.

And so I think we can leave it with that.

Yes, good morning, gentlemen. Thank you for taking my questions.

Most of them have been actually answered already. I have a last one may be on your remodeling programs.

We've been talking a lot of synergies but on your day-to-day business update and improving stores, do you see any change in traffic, in volume patterns in recent months? And is there any reason to change the scale of the remodeling and the pace of the remodeling or should we consider previous plans as still valid?

Thank you.

I assume you're talking about Food Lion in this case as a remodeling plan. We continue the same pace.

And we will open this year in Richmond area another 71, we're now rolling at Greensboro. At the end of the year will be over 500 store remodeled already with the Easy, Fresh & Affordable concept.

Our existing last week, the tariff markets, a lot of enthusiasm from people, sales growth is clearly there. So I think this is the right thing you see before Easy, Fresh & Affordable rollout.

And on traffic metrics, did you see the same kind of metrics even in an inflationary environment?

Yes. We see customers and you see higher baskets, that's, in a way, the two drivers of the success of Easy, Fresh & Affordable.

Great, thanks.

Operator, we will now take the last question, please.

Good morning, thank you very much indeed. I will be very quick.

Lastly, there is been some commentary on a the tougher competitive environment than of these. I think specifically, less calls in the Netherlands.

Is that something you're seeing a sort of bowl or maybe that something that you’re driving at bowl? And secondly, can I just double check that you're talking about taking volume market share in all your U.S.

regional market, I guess specifically, if that's the case, at Giant Landover, which will very encouraging. And then lastly and directionally, given what you said on less deflation moving towards inflation of flat in Q2, do you expect market expectations for Ahold USA Q2 like-for-like to be positive?

Thank you.

Okay, on your – when I spoke about market share, it was dollar market share and we have seen some improvements and some positiveness on giant land over on the food market share. But that's clearly driven, of course, by a better performance of our stores, our supermarkets versus the supermarkets of our competitors, we do a better job there.

That's clear, but its dollar shares its not volume share.

Do you have volume share? Are you able to comment on volume share across the market?

We normally track it, but I don't think

I don't think it's massively different. We're not making significant changes in pricing in the first quarter relative to the markets.

I don't think it would be a significant difference. I don’t have them in front of me, but I don't think it's significantly different.

The traction of the market was about 3%, don't forget that, Nick, in the first quarter in the Ahold USA market.

In Belgium.

Yes.

That’s very helpful. Thank you.

We've said we can see – we'll see an improvement in performance in our identical sales on that? So I'm not going to get pulled into what that means in terms of numbers, but it will be an improving performance.

I think in terms of bol and nonfood, we continue to see strong growth at bol. I don't think we've seen anything specific in terms of the nonfood markets.

bol continues to do very well, up around 30%. Obviously we see some stuff competitors that grew in Netherlands but I don't see anything specific that I've referred to in terms of nonfood.

No, no, not at all. And I would – the other thing you would say in the Dutch market that the nonfood online top five retailers, so we are clearly number one, as you know, and the Dutch market is growing and outperforming the growth of the total month of market and the continuing they so the nonfood market is stably growing in the Dutch market, we are outperforming by far.

But when we look online players, it's also there. What you see is the top five is really most of the online game now and creating higher share.

Coolblue has been growing a bit faster but you should not compare that like-for-like because Coolblue's assortment is a lot of high-priced value items, so it's electronics where – at the same time, bol is selling EUR 1 and EUR 2 at the same time in nonfood and nonduty, et cetera. So you cannot compare apples-to-apples because there's a different also of assortment at the same time.

But that's the situation and we are very pleased as it continues track of bol. I mentioned also the Belgian market where we continue to grow in our Plaza seller's place in a way where we get the marketplace is very appreciative about our customers.

Okay. Ladies and gentlemen, that concludes this conference call and webcast.

Thank you for joining us today and have a nice day.