Dutch retail giant Royal Ahold has announced its CEO and CFO are to resign amid investigations into the company’s US Foodservice unit for accounting irregularities which led to earnings being overstated by at least US$500m.

Ahold said that net earnings and earnings per share will be significantly lower than previously indicated for the year ended 29 December 2002. The retailer blamed the lower earnings on overstatements of income related to promotional allowance programmes at US Foodservice which are still being investigated.

Based on information obtained to date, the company believes that operating earnings for fiscal year 2001 and expected operating earnings for fiscal year 2002 have been overstated by an amount that Ahold believes may exceed $500m, with the majority of that amount occurring in the expected operating earnings for fiscal year 2002.

Ahold said the overstatements of the income discovered to date will require the restatement of Ahold’s financial statements for fiscal year 2001 and the first three quarters of fiscal year 2002. As a consequence of the accounting irregularities and, in particular, the need to complete related investigations, the company has deferred the announcement of its full year results scheduled for 5 March. Ahold’s auditors have also informed the company that they are suspending the fiscal year 2002 audit pending completion of these investigations.

Ahold also announced that it has been investigating, through forensic accountants, the legality of certain transactions and accounts at its Argentine subsidiary Disco. Because the investigation is ongoing, Ahold said it could not currently quantify the full financial impact of these matters.

As a result of these events, Ahold said its president and chief executive officer, Cees van der Hoeven, and chief financial officer, Michael Meurs, will resign. They will stay on for an appropriate period of time in order to effect an orderly transition of affairs. The chairman of the supervisory board, Henny de Ruiter, has been designated to be responsible for the daily supervision of the conduct of the executive board and the business affairs of the company.