Case AD vs T Q+A 20240403-final

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1 Ahold Delhaize vs. Tesco – Measuring & Analyzing Firm Financial Performance 1 ANSWERS Introduction Aditi Laghari gazed pensively out the panoramic window of her 12 th floor apartment on S. Lakeshore Drive, Chicago, looking out onto Lake Michigan. It was a brisk but sunny morning on 5/27/23, and she felt both nervous and excited as she looked forward to her prestigious Associate position in summer 2023 with Intelligent Alpha Ltd., a fundamentals-focused long-horizon UK investment fund that “ specialized in identifying future winners in UK and European equities ” . CEO Sir Jim ‘ Tiger ’ Jones had just uploaded a get-your-feet-wet assignment case materials for her into her corporate Dropbox account. However, she’d faced bigger challenges in her life, and she was determined to send Tiger back the very best work she could put together over the next 24 hours. The assignment seemed simple enough. She read it again: Aditi, please analyze the financial performance over the past three fiscal years of the two large Dutch and UK retailers Koninklijke Ahold Delhaize N.V. (“Ahold Delhaize ” or AD ) and Tesco PLC (“Tesco” ). [1] Which has had the better firm financial performance (FFP)? [2] Which is likely to have better FFP over the next three fiscal years? I need your analysis to help me determine which of the two retailers likely offers the best risk-adjusted expected stock returns over the next three years. Please provide me your analysis by answering my questions and use the structure I’ve provided you. Be crisp and clear. I’ve heard good things about you from José Moreno in our Chicago office, and I may invest GBP 5 million of Intelligent Alpha’s capital into one of the two retailers based on your analysis. Tiger. p.s. You’ll no doubt look at what’s on each firm’s website and in their latest and past annual reports. Beyond that, I recommend that you take advantage of the Excel templates that Dr. Ren Huateng, our data analytics guru, was putting together for you before he had to suddenly leave our London office to attend to his elderly grandmother who is very ill. But rather than uploading your completed Excel templates, put the relevant parts into your report for me to read. Aditi took a deep breath, plugged in her UltraLeadEd ™ expresso machine, and began to work. She had a sense that she’d be needing all the coffee she could handle over the next 24 hours, but she was going to do her best to ace this assignment and make T iger glad he’d hired her for a 202 3 summer internship. 1 Written by Prof. John R. M. Hand. Version 4/3/24.

2 Suggested answers AHOLD DELHAIZE vs. TESCO Version: 4/3/24 Q1. Use Table 1 to crisply describe + compare Ahold’s and Tesco’s key firm characteristics at 5/27/23. What does each lead you to ‘hypothesize’ that you may see in Ahold’s and Tesco’s recent FFP? (3 pts) Table 1 Economic factor Firm characteristic AHOLD DELHAIZE MRFYear = FY 2022 (1/1/23) TESCO MRFYear = FY 2023 (2/25/23) Expectation or ‘hypothesis’ re: past 3 years of FFP Maturity Age (in years) A = 136, D = 157 A+D ≈ 7 years 104 years old Survivor strength (or weak old age?) → avg FFP_AD and FFP_T > (<). A & D too old to marry successfully? Scale Revenues in MRFY EUR 87.0 bn in FY 2022. GBP 65.8 bn ≈ EUR 75.7 bn @ EUR → GBP FX 5/27/23 Scale can bring market power over customers or suppliers → high FFP for both AD and T Geog. Reach Own country vs. international revenues: Where and percentages? US-focused (64%) Europe (36%) Very UK-focused: UK+ROI (93%) Europe (7%), US (0%) Geographic focus can bring market power → FFP_T > FFP_AD But low diversification of T may → RISK_T > RISK_AD. Products & services (P&S) Is range of P&S broad or narrow? What are the key P&S? Narrow. AD frames itself as a “leading international food retailer” . Otherwise known as Groceries! Very broad: Food, clothing, electronics, music, telecom services, financial services. Upmarket “Finest”, mid - range Tesco brand, and low- price “Value”. Higher margins in and electronics and Upmarket “Fi nest ” may → FFP_T > FFP_AD. Business strategy Does the firm have a well- articulated strategic plan in place for the future? What is it focused on? Yes: Leading Together = “Eat well, save time, live better”. Investing to grow: Omnichannel, Technology, Health & Sustainability, Portfolio & Scale Efficiencies, Best Talent. (2022 Ann Report, p.14) Yes? “We are a leading multinational grocery retailer, which aims to serve customers affordable, healthy and sustainable food .” (CEO, 2023 Ann Report, p.3) + But also lots else … Booker + dunnhumby + One Stop + Tesco Bank + Tesco mobile. All strategies and changes in strategies bring risks and returns. + But i t’s u nlikely that any strategy brings long-term above-normal financial performance because of competition from existing players, new entrants, new technologies, etc. Intangible assets Brands US = Food Lion, Stop & Shop, Peapod, Giant Foods + Netherlands = Albert Heijn. (2022 Ann Report pp.20-24) UK = Tesco, Booker, One Stop, F&F, Booker. But mainly “Tesco”. H as the reputation of being “ every blasted where in England” = a liability? My mother hated Tesco and boycotted it For both A and T, Brand intangibles can bring high returns from new products & services, but they often come with high risks. Online presence % of Revenues from online sales In FY 2022: EUR 11.3 bn = 13% of REV. Grew 9% over 2021. GBP 5.6 bn = 9% of REV. Fell 5.4% over 2022. (2023 Ann Report p.32) Near-term FFP from online REV likely to be sub-par due to startup costs? Longer-term FFP likely to be par (needed to stay competitive) or above-par (if can capture first-mover advantage). Online REV was likely important in Covid = FY 2020/21. • I use GBP 1.00 = EUR 1.15 (FX rate @ 5/27/23 … although having an exact rate is not crucial) Sources: 1. https://en.wikipedia.org/wiki/Ahold_Delhaize ; https://en.wikipedia.org/wiki/Tesco 2. Ahold 2022 annual report ( released 3/1/23) 3. Tesco-plc-preliminary-results-2223-press-release.pdf (4/13/23); Tesco 2023 annual report ( released 5/13/23)

3 Q2. Copy + paste into pp. 3-5 in a visually neat way the following from your answer Excel file: 1. Table 2a Here on p.3 = AD’s 2016-2022 as-reported Consolidated Income Statements (0.5 pt) Before you can do the analysis that’s asked for in Q3, you need to find the as-reported financial statements for each firm. These are located at each firm’s website. It is crucial to realize that Ahold’s fiscal year ends ≈ Dec. 31 st , whereas Tesco’s is ≈ end of February. That means that it’s best to compare Ahold fiscal 2022 with Tesco 2023 , not with Tesco fiscal 2022, since Ahold fiscal 2022 and Tesco fiscal 2023 overlap by a large degree ≈ 10 months. * * Footnote to T2a.1 and T2a.2. While possible to do but with a lot of difficulty and effort , it’s ex -ante unlikely that the potentially “krillier” approach of using deep -krill detailed quarterly + portions of quarterly data will be worth the inferential benefits. Fiscal year end 1/1/2017 12/31/2017 12/30/2018 12/29/2019 1/3/2021 1/2/2022 1/1/2023 Fiscal year FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Page # in Annual Report p.111 p.123 p.89 p.120 p.143 p.179 p.189 # of pages in Annual Report 251 285 241 219 253 290 317 Net sales (in Euros millions) € 49,695 € 62,890 € 62,791 € 66,260 € 74,736 € 75,601 € 86,984 Cost of sales -36,317 -46,121 -45,839 -48,200 -54,160 -54,916 -63,689 Gross profit 13,378 16,769 16,952 18,060 20,576 20,685 23,295 Other income 0 0 0 0 470 531 663 Selling expenses -9,876 -12,245 -12,236 -13,021 -14,620 -14,929 -16,989 General and administrative expenses -1,918 -2,299 -2,321 -2,377 -4,235 -2,967 -3,201 Operating income 1,584 2,225 2,395 2,662 2,191 3,320 3,768 Interest income 15 32 70 65 35 29 69 Interest expense -273 -294 -310 -175 -138 -181 -248 Net interest expense on defined benefit pension plans -18 -22 -19 -18 -16 -17 -17 Interest accretion to lease liability 0 0 0 -366 -357 -337 -356 Other financial income (expense) -265 -13 13 -34 -9 -10 0 Net financial expenses -541 -297 -246 -528 -485 -516 -552 Income before income taxes 1,043 1,928 2,149 2,134 1,706 2,804 3,216 Income taxes -247 -146 -372 -417 -331 -591 -714 Share in income of joint ventures 34 35 32 50 22 33 44 Income from continuing operations 830 1,817 1,809 1,767 1,397 2,246 2,546 Income (loss) from discontinued operations 0 0 -16 -1 0 0 0 Net income € 830 € 1,817 € 1,793 € 1,766 € 1,397 € 2,246 € 2,546 Attributable to: Common shareholders 830 1,817 1,793 1,766 1,397 2,246 2,546 Non-controlling interests 0 0 0 0 0 0 0 Net income € 830 € 1,817 € 1,793 € 1,766 € 1,397 € 2,246 € 2,546 Earnings per share: Net income per share attributable to common shareholders: Basic 0.81 € 1.45 € 1.52 € 1.60 € 1.31 € 2.18 € 2.56 € Diluted 0.81 € 1.43 € 1.50 € 1.59 € 1.30 € 2.17 € 2.54 € Income from continuing operations per share attributable to common shareholders: Basic 0.81 € 1.45 € 1.54 € 1.60 € 1.31 € 2.18 € 2.56 € Diluted 0.81 € 1.43 € 1.52 € 1.59 € 1.30 € 2.17 € 2.54 € Table T2a.1 AHOLD DELHAIZE. As-reported Consolidated Income Statements from AD's 2016-2022 Annual Reports. <NOTE: AD's FYE ≈ 12/31/CalYr and T's FYE ≈ 2/28/CalYr+1. So AD_FY2022 ≈ Tesco_FY2023>

4 Here on p.4 = Tesco’s 2017-2023 as-reported Group Income Statements (0.5 pt) 2. Table 2b → THESE ARE ON NEXT PAGE (landscape format – so you can use the whole page) p.5 = AD’s 2016-2022 as-reported Consolidated Balance Sheets (0.5 pt) p.5 = Tesco’s 2017-2023 as-reported Group Balance Sheets (0.5 pt) Fiscal year end 2/25/2017 2/24/2018 2/23/2019 2/29/2020 2/27/2021 2/26/2022 2/25/2023 Fiscal year FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Page # in Annual Report p.86 p.74 p.92 p.78 p.112 p.116 p.120 # of pages in Annual Report 180 160 190 176 220 220 220 Revenues (in GBP millions) £ 55,917 £ 57,491 £ 63,911 £ 64,760 £ 57,887 £ 61,344 £ 65,762 Cost of sales -53,015 -54,141 -59,767 -60,180 -53,538 -56,750 -62,034 Impairment reversal/(loss) on financial assets 0 0 0 0 -384 39 -67 Gross profit/(loss) 2,902 3,350 4,144 4,580 3,965 4,633 3,661 Administrative expenses -1,995 -1,633 -2,075 -2,062 -2,229 -2,073 -2,136 Profits/(losses) arising on property-related items 110 120 84 0 0 0 0 Operating profit/(loss) 1,017 1,837 2,153 2,518 1,736 2,560 1,525 Share of post-tax profits/(losses) of JVs -107 -6 35 18 26 15 8 Finance income 109 98 22 23 15 9 85 Finance expense -874 -631 -536 -1244 -952 -551 -618 Profit/(loss) before tax 145 1,298 1,674 1,315 825 2,033 1,000 Taxation -87 -306 -354 -380 -104 -510 -247 Profit/(loss) for the year from continuing operations 58 992 1,320 935 721 1,523 753 Discontinued operations -112 216 0 38 5,426 -40 -9 Profit/(loss) for the year -54 1,208 1,320 973 6,147 1,483 744 Attributable to: Owners of the parent -40 1,206 1,322 971 6,143 1,481 745 Non-controlling interests -14 2 -2 2 4 2 -1 Net income attributable to owners of the parent -£ 54 £ 1,208 £ 1,320 £ 973 £ 6,147 £ 1,483 £ 744 Earnings/(losses) per share from continuing and discontinued operations Basic 0.0049 -£ 0.1477 £ 0.1365 £ 0.0999 £ 0.6183 £ 0.1934 £ 0.1005 £ Diluted 0.0049 -£ 0.1472 £ 0.1355 £ 0.0993 £ 0.6166 £ 0.1912 £ 0.0996 £ Earnings/(losses) per share from continuing operations Basic 0.0081 £ 0.1212 £ 0.1365 £ 0.0960 £ 0.0560 £ 0.1986 £ 0.1017 £ Diluted 0.0081 £ 0.1208 £ 0.1355 £ 0.0954 £ 0.0558 £ 0.1964 £ 0.1008 £ Table T2a.2 TESCO. As-reported Group Income Statements from Tesco's 2017-2023 Annual Reports. <NOTE: AD's FYE ≈ 12/31/CalYr and T's FYE ≈ 2/28/CalYr+1. So AD_FY2022 ≈ Tesco_FY2023>

5 Fiscal year end 1/1/2017 12/31/2017 12/30/2018 12/29/2019 1/3/2021 1/2/2022 1/1/2023 Fiscal year end 1/1/2017 12/31/2017 12/30/2018 12/29/2019 1/3/2021 1/2/2022 1/1/2023 Fiscal year FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Fiscal year FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Page # in Annual Report p.113 p.125 p.91 p.122 p.145 p.181 p.191 Page # in Annual Report p.113 p.125 p.91 p.122 p.145 p.181 p.191 ASSETS (in Euros millions) EQUITY AND LIABILITIES PP&E 11,770 € 10,689 € 11,147 € 10,519 € 10,696 € 11,838 € 12,482 € Equity attributable to common shareholders 16,276 € 15,170 € 14,816 € 14,083 € 12,432 € 13,721 € 15,405 € Right-of-use asset 0 0 0 7,308 7,455 9,010 9,607 Investment property 727 650 629 883 739 708 661 Loans 3,311 3,289 3,683 3,841 3,863 4,678 4,526 Intangible assets 12,547 11,634 12,013 12,060 11,565 12,770 13,174 Other non-current financial liabilities 2,527 2,098 2,055 8,716 8,905 10,473 11,055 Investments in JVs & associates 274 230 236 229 227 244 262 Pensions and other post-employment benefits 659 567 532 677 1,235 1,107 696 Other non-current financial assets 216 192 238 661 705 1,193 1,193 Deferred tax liabilities 1,596 1,105 864 786 664 746 1,005 Deferrred tax assets 700 436 149 213 323 289 242 Provisions 931 808 794 724 718 746 742 Other non-current assets 64 70 77 49 53 76 116 Other non-current liabilities 578 529 566 74 63 62 44 Total non-current assets 26,298 23,901 24,489 31,922 31,763 36,128 37,737 Total non-current liabilities 9,602 8,396 8,494 14,818 15,448 17,812 18,068 Assets held for sale 50 14 23 67 19 18 26 Inventories 3,288 3,077 3,196 3,347 3,245 3,728 4,611 Liabilities related to assets held for sale 9 0 0 0 0 0 0 Receivables 1,588 1,606 1,759 1,905 1,975 2,058 2,391 Accounts payable 5,389 5,277 5,816 6,311 6,795 7,563 8,191 Other current financial assets 677 238 461 317 360 356 373 Other current financial liabilities 2,178 2,210 1,232 3,257 2,386 2,552 2,689 Income taxes receivable 36 154 53 39 58 45 35 Income taxes payable 87 136 110 82 128 96 230 Prepaid expenses and other current assets 306 300 228 178 337 387 301 Provisions 383 355 326 349 378 484 377 Cash & cash equivalents 4,032 4,581 3,122 3,717 2,935 2,993 3,081 Other current liabilities 2,351 2,327 2,537 2,592 3,125 3,484 3,595 Total current assets 9,977 9,970 8,842 9,570 8,929 9,585 10,818 Total current liabilities 10,397 10,305 10,021 12,591 12,812 14,179 15,082 Total assets 36,275 € 33,871 € 33,331 € 41,492 € 40,692 € 45,713 € 48,555 € Total equity and liabilities 36,275 € 33,871 € 33,331 € 41,492 € 40,692 € 45,713 € 48,555 € Cross-check on does Balance Sheet balance? B/S bals B/S bals B/S bals B/S bals B/S bals B/S bals B/S bals Fiscal year end 2/25/2017 2/24/2018 2/23/2019 2/29/2020 2/27/2021 2/26/2022 2/25/2023 Fiscal year end 2/25/2017 2/24/2018 2/23/2019 2/29/2020 2/27/2021 2/26/2022 2/25/2023 Fiscal year FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Fiscal year FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Page # in Annual Report p.88 p.76 p.94 p.80 p.114 p.118 p.122 Page # in Annual Report p.88 p.76 p.94 p.80 p.114 p.118 p.122 Non-current assets (in GBP millions) Current liabilities Goodwill, software + other intangible assets 2,717 £ 2,661 £ 6,264 £ 6,119 £ 5,393 £ 5,360 £ 5,375 £ Trade and other payables 8,875 £ 8,996 £ 9,354 £ 8,922 £ 8,399 £ 9,181 £ 9,818 £ Property, plant and equipment 18,108 18,521 19,023 19,234 17,211 17,060 16,862 Borrowings 2,560 1,479 1,599 1,490 1,080 725 1,770 Right of use assets 0 0 0 6,874 5,951 5,720 5,500 Lease liabilities 0 0 0 598 575 547 595 Investment property 64 100 36 26 19 22 24 Derivative financial instruments 61 69 250 61 81 26 99 Investments in JVs and associates 739 689 704 307 178 86 93 Customer deposits and deposits from banks 6,687 7,812 8,832 6,377 5,321 4,729 4,485 Financial assets @ FV via OCI; Other invsts 823 860 979 866 11 1,253 1,339 Current tax liabilities 613 335 325 324 79 11 18 Investment securities at amortized cost 0 0 0 0 752 0 0 Provisions (total) 438 547 320 155 186 283 366 Trade and other receivables 180 186 195 166 170 159 79 Other (e.g., Insurance contract provisions) 171 0 0 0 276 637 584 Loans and advances to customers and banks 5,795 6,885 7,868 4,171 3,309 3,141 3,029 19,405 19,238 20,680 17,927 15,997 16,139 17,735 Reinsurance assets 0 0 0 0 0 184 145 Non-current liabilities Derivative financial instruments 1,303 1,117 1,178 1,083 1,425 942 873 Trade and other payables 324 364 384 170 109 53 153 Post-employment benefit surplus 0 0 0 0 0 3,150 6 Borrowings 9,433 7,142 5,673 6,005 6,188 6,674 5,581 Deferred tax assets 707 117 132 292 552 85 82 Lease liabilities 0 0 0 8,968 7,827 7,411 7,132 30,436 31,136 36,379 39,138 34,971 37,162 33,407 Derivative financial instruments + other liabilities 607 594 389 887 926 357 288 Current assets Customer deposits and deposits from banks 2,276 2,972 3,296 1,830 1,017 1,650 2,265 Financial assets at fair value through other com 284 68 67 202 3 226 353 Post-employment benefit obligations 6,621 3,282 2,808 3,085 1,222 303 400 Inventories 2,301 2,263 2,617 2,433 2,069 2,339 2,510 Deferred tax liabilities 88 91 236 40 48 910 119 Trade and other receivables 1,475 1,482 1,640 1,396 1,263 1,263 1,315 Provisions 685 721 747 137 119 210 229 Loans and advances to customers and banks 4,166 4,637 4,882 4,280 3,093 3,349 4,052 20,034 15,166 13,533 21,122 17,456 17,568 16,167 Investment secs at amtzed cost/Reins assets 0 0 0 0 175 61 72 Equity Derivative financial instruments 286 27 52 63 37 69 57 Share capital 409 410 490 490 490 484 463 Current tax assets 13 12 6 21 41 93 63 Share premium 5,096 5,107 5,165 5,165 5,165 5,165 5,165 Short-term investments 2,727 1,029 390 1,076 1,011 2,076 1,628 All other reserves 601 735 3,798 3,658 3,183 3,079 3,123 Cash and cash equivalents 3,821 4,059 2,916 3,408 2,510 2,345 2,465 Retained earnings 332 4,228 5,405 3,962 3,505 6,932 3,490 15,073 13,577 12,570 12,879 10,202 11,821 12,515 Equity attributable to owners of the parent 6,438 10,480 14,858 13,275 12,343 15,660 12,241 Assets classified as held for sale 344 149 98 285 605 368 210 Non-controlling interests (24) (22) (24) (22) (18) (16) (11) 15,417 13,726 12,668 13,164 10,807 12,189 12,725 Total equity 6,414 10,458 14,834 13,253 12,325 15,644 12,230 Total assets 45,853 £ 44,862 £ 49,047 £ 52,302 £ 45,778 £ 49,351 £ 46,132 £ Total equity and liabilities 45,853 £ 44,862 £ 49,047 £ 52,302 £ 45,778 £ 49,351 £ 46,132 £ Cross-check on does Balance Sheet balance? B/S bals B/S bals B/S bals B/S bals B/S bals B/S bals B/S bals Table T2b.1 AHOLD DELHAIZE. As-reported Consolidated Balance Sheets from AD's 2016-2022 Annual Reports. <NOTE: AD's FYE ≈ 12/31/CalYr and T's FYE ≈ 2/28/CalYr+1. So AD_FY2022 ≈ Tesco_FY2023> Table T2b.2 TESCO. As-reported Group Balance Sheets from Tesco's 2017-2023 Annual Reports. <NOTE: AD's FYE ≈ 12/31/CalYr and T's FYE ≈ 2/28/CalYr+1. So AD_FY2022 ≈ Tesco_FY2023>

6 Q3. Do the vertical & horizontal calculations in Table 3 = Vert+Horiz analyses , using each firm’s data from Q2. Highlight key number(s). What do your Table 3 analyse s tell you about each firm’s FFP over the past 3 years ? What challenge(s) do you face in arriving at (relatively) unbiased, apples-to-apples analyses of Ahold Delhaize and Tesco ’s annual FFP for over time, and at a given point in time across the two firms? (4 pts) Two bottom lines here. First, more reliable FFP assessments come from vertical analysis than horizontal analysis because horizontal doesn’t control for changes in scale due to mergers & acquisitions or divestments, while vertical does. Second, large one- time items in firms’ P&Ls materially bias their NI, so in arriving at (relatively) unbiased apples-to-apples analyses it’s best to DE-BIAS by EXCLUDING such items. I’ve done this in Tables 3a.2 and T3b.2 by backing out of Tesco’s FY 2021 P&L the large one-time GBP 5.4 billion of after-tax profit that came (mainly) from Tesco disposing of its Thailand & Malaysia businesses [ Tesco’s FY 2021 Annual Report, Note 7, p.138]. To me this is the only material adjustment to either firm’s P&Ls that warrants being made. VERTICAL ANALYSIS Based on Table 3a.2, my conclusions are [1] AD performed better than T in the past 3 years and in the 4 years before that, per its lower avg. COS+Selling/Rev and higher NI/Rev; [2] both AD and T have had similar vertically-sized performance in the past 3 years as in the 4 years before that; [3] AD has seen smoother COS+Selling/Rev and NI/Rev over time than T; and [4] on a volatility-risk-adjusted basis, AD has performed in fundamental terms much better than T over the entire 7 years. Table T3a.1 CALCULATED PRIMA-FACIE = AS-REPORTED Common-sized Income Statements VERTICAL analysis = As % of REV FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 REV 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% COS 73.1% 73.3% 73.0% 72.7% 72.5% 72.6% 73.2% 73.0% 72.8% 93.9% 93.1% 94.8% 94.2% 93.5% 92.9% 92.5% 92.5% 94.3% Gross profit 26.9% 26.7% 27.0% 27.3% 27.5% 27.4% 26.8% 27.0% 27.2% 6.1% 6.7% 5.2% 5.8% 6.5% 7.1% 6.8% 7.6% 5.6% Selling 19.9% 19.5% 19.5% 19.7% 19.6% 19.7% 19.5% 19.6% 19.6% COS + Selling 93.0% 92.8% 92.5% 92.4% 92.0% 92.4% 92.8% 92.7% 92.4% 93.9% 93.1% 94.8% 94.2% 93.5% 92.9% 92.5% 92.5% 94.3% G&A 3.9% 3.7% 3.7% 3.6% 5.7% 3.9% 3.7% 3.7% 4.4% 3.2% 3.5% 3.6% 2.8% 3.2% 3.2% 3.9% 3.4% 3.2% Operating income 3.2% 3.5% 3.8% 4.0% 2.9% 4.4% 4.3% 3.6% 3.9% 3.1% 3.2% 1.8% 3.2% 3.4% 3.9% 3.0% 4.2% 2.3% Net interest expense 1.1% 0.5% 0.4% 0.8% 0.6% 0.7% 0.6% 0.7% 0.7% 1.2% 1.1% 1.4% 0.9% 0.8% 1.9% 1.6% 0.9% 0.8% ITX 0.5% 0.2% 0.6% 0.6% 0.4% 0.8% 0.8% 0.5% 0.7% 0.5% 0.5% 0.2% 0.5% 0.6% 0.6% 0.2% 0.8% 0.4% NI to common 1.7% 2.9% 2.9% 2.7% 1.9% 3.0% 2.9% 2.5% 2.6% 1.4% 4.7% -0.1% 2.1% 2.1% 1.5% 10.6% 2.4% 1.1% Smoothness as measured by standard deviation of annual NI to common → 0.6% 0.6% 1.0% 5.1% Table T3a.2 CALCULATED AFTER EXCLUDING LARGE ONE-TIME PROFIT FROM DISCONTINUED OPERATIONS Common-sized Income Statements VERTICAL analysis = As % of REV FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 REV 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% COS 73.1% 73.3% 73.0% 72.7% 72.5% 72.6% 73.2% 73.0% 72.8% 93.9% 93.1% 94.8% 94.2% 93.5% 92.9% 92.5% 92.5% 94.3% Gross profit 26.9% 26.7% 27.0% 27.3% 27.5% 27.4% 26.8% 27.0% 27.2% 6.1% 6.7% 5.2% 5.8% 6.5% 7.1% 6.8% 7.6% 5.6% Selling 19.9% 19.5% 19.5% 19.7% 19.6% 19.7% 19.5% 19.6% 19.6% COS + Selling 93.0% 92.8% 92.5% 92.4% 92.0% 92.4% 92.8% 92.7% 92.4% 93.9% 93.1% 94.8% 94.2% 93.5% 92.9% 92.5% 92.5% 94.3% G&A 3.9% 3.7% 3.7% 3.6% 5.7% 3.9% 3.7% 3.7% 4.4% 3.2% 3.5% 3.6% 2.8% 3.2% 3.2% 3.9% 3.4% 3.2% Operating income 3.2% 3.5% 3.8% 4.0% 2.9% 4.4% 4.3% 3.6% 3.9% 3.1% 3.2% 1.8% 3.2% 3.4% 3.9% 3.0% 4.2% 2.3% Net interest expense 1.1% 0.5% 0.4% 0.8% 0.6% 0.7% 0.6% 0.7% 0.7% 1.2% 1.1% 1.4% 0.9% 0.8% 1.9% 1.6% 0.9% 0.8% ITX 0.5% 0.2% 0.6% 0.6% 0.4% 0.8% 0.8% 0.5% 0.7% 0.5% 0.5% 0.2% 0.5% 0.6% 0.6% 0.2% 0.8% 0.4% NI to common 1.7% 2.9% 2.9% 2.7% 1.9% 3.0% 2.9% 2.5% 2.6% 1.4% 1.6% -0.1% 2.1% 2.1% 1.5% 1.2% 2.4% 1.1% Smoothness as measured by standard deviation of annual NI to common → 0.6% 0.6% 1.0% 0.7% Avg. 21-23 AHOLD TESCO Avg. 16-19 Avg. 20-22 Avg. 17-20 AHOLD TESCO Avg. 16-19 Avg. 20-22 Avg. 17-20 Avg. 21-23

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