AHOLD DENIES RUMORS OF ACCOUNTING IRREGULARITY

DAVID GHITELMAN

ZAANDAM, Netherlands -- Ahold here last week publicly denied rumors of accounting irregularities that battered the company's share price on the Amsterdam exchange late last month.

Speaking at a press conference here following the release of financial results for 2001, Cees van der Hoeven, Ahold's president and chief executive, said, "Recently, we were very disturbed by wrongful speculation about so-called 'accounting and tax issues' at Ahold. These rumors are totally unfounded."

Deborah Weinswig, food and drug chains analyst, Bear Stearns, New York, called the concerns about Ahold's accounting practices "overdone." She explained that the rumors involved charges that Ahold "accounted for small acquisitions in food service [less than 5% of total Ahold sales] incorrectly, by adding them directly to organic growth in their first full year of operations."

Van der Hoeven said the company would discuss the speculations in greater detail "in the coming days."

The company reported that retail sales in the United States rose 10.8% to $23.2 billion. Comparable-store sales grew by 3.1% and same-store sales rose 2.6%.

Sales were higher at all U.S. retail operating companies, especially at Stop & Shop Supermarket Co., Quincy, Mass., and Giant Foods, Landover, Md.

Retail operating earnings rose 16.7% to $1.3 billion. All retail operating companies contributed to the rise in operating earnings, the company said.

The Grand Union stores acquired and remodeled by Stop & Shop and Tops Markets, Williamsville, N.Y., in the first half of the year performed well, the company said, with the $27.8 million cost for remodeling absorbed in operating earnings.

Bi-Lo, Greenville, S.C., underperformed against expectations, but management changes to improve results have been implemented, according to Ahold.

Internet retailer Peapod, Chicago, had an operating loss of $47.9 million, compared with a loss of $32.2 million in 2000.

Excluding Peapod's loss, the company operating earnings as a percentage of sales amounted to 5.7%, up from 5.4% in 2000.

Van der Hoeven said, "The U.S. retail environment softened in the course of the second half and sales growth at Ahold USA Retail was a reflection of that."

However, van der Hoeven noted that despite the soft environment, the company posted improved results. "We are proud that once again, outside of Peapod, we have been able to achieve increasing operating margins," he said.

Looking to the future, van der Hoeven observed, "Our expectation is that the retail environment, particularly in the United States, will slowly improve in the course of this year. Therefore, we expect to see somewhat stronger growth rates in the second half, particularly as we are up against the weaker numbers of last year."

In his presentation at the press conference here, Bill Grize, president and CEO, Ahold USA, Chantilly, Va., said that 2001 performance highlights at Ahold's U.S. retail operations included: share gains in most markets; strengthened shared services between Tops and Giant Food Stores, Carlisle, Pa.; and improved operations at Peapod.

For 2002, he projected retail sales of $27 billion, the opening of 80 new and 154 replacement stores, the implementation of common processes supported with common information systems, continued commitment to local brands and local marketing, and the implementation of Ahold's companywide, economic, value-added business model to drive capital efficiency.