Strengthened market positions but weak quarter in Dagab
Axfood is summarising a quarter with growth higher than the market once again, despite exceptionally high comparison figures. Market positions were thereby strengthened even further, with a continued positive trend in customer traffic and increased volumes. Earnings were negatively impacted by a weaker sales development in Dagab, as well as costs associated with operational disruptions and the restructuring of logistics during the period. In the quarter, an agreement was signed to acquire City Gross, which gives Axfood growth opportunities in the hypermarket segment and improves competition in the market.
President and CEO Klas Balkow’s comments on the interim report for the second quarter 2024:
“Despite exceptionally high comparison figures, Axfood grew more than the market during the second quarter. Retail sales increased 2.6%, driven by continued volume growth due to a strong inflow of customers. It is clear that our concepts are consolidating their market positions which have been significantly improved in recent years.
Willys’ ambition to offer Sweden’s cheapest bag of groceries is fundamental to the chain’s strategy, and during the quarter Willys continued to secure its price position. The 2.6% growth – in the face of the highest comparison figures in the market – shows that its strategy is working. This is also confirmed by Willys' customer surveys, which show high customer satisfaction and strong loyalty.
Hemköp is continuing to work on its assortment, price value and store modernisations, and once again posted strong growth in like-for-like sales of 4.6% during the quarter. The café and restaurant market is facing a challenging situation as many consumers are prioritising other types of spending than going out to eat. Our restaurant wholesaler Snabbgross delivered growth of 1.8%.
During the quarter, we gradually scaled up our frozen food volumes at the new logistics centre in Bålsta, which means that the facility now has operations up and running in all temperature zones. In addition, the expansion and automation of the existing high-bay warehouse in Backa, Gothenburg has also intensified. However, we have experienced operational disruptions while ramping up Bålsta and have re-balanced volumes between warehouses to optimise logistics flows. During this transition, we have prioritised stability in deliveries to stores which has resulted in significantly higher personnel and transport costs. Overall, the establishment of the new logistics structure results in higher costs in the short term, but with expected annual efficiency improvements in line with what has been communicated earlier. We are now in a better position to be back on track with the restructuring in the second half of the year and to gradually accelerate the work on operational adjustments.
In early June, we announced that we are acquiring the City Gross hypermarket concept. We are delighted to have reached this agreement and now await the Swedish Competition Authority’s review. We look forward to working to strengthen the chain’s position and more clearly challenge the major players in the growing hypermarket segment.
We are summarising a quarter with a positive development in our chains, but weaker earnings with a negative impact from costs of SEK 86 m related to operational disruptions and the acquisition of City Gross. We have a strong financial position and are confident that the investments we are making will create a solid platform for improved competitiveness in the future.”
Second quarter summary
- Net sales totalled SEK 21,044 m (20,797), an increase of 1.2%.
- Retail sales totalled SEK 16,509 m (16,098), an increase of 2.6%.
- Operating profit amounted to SEK 836 m (878). Operating profit in the prior year period included items affecting comparability of SEK -64 m. The operating margin was 4.0% (4.2).
- Adjusted operating profit amounted to SEK 836 m (942). The adjusted operating margin amounted to 4.0% (4.5). Operating profit was impacted by SEK 86 m in costs associated with restructuring of logistics, the acquisition of City Gross, and operational disruptions in the stores' payment systems.
- Net profit for the period amounted to SEK 582 m (631) and earnings per share before dilution to SEK 2.68 (2.93).
- On 11 June, an agreement was signed to acquire 90.1% of the shares in City Gross, which means that Axfood is increasing its shareholding to 100%. Completion of the transaction is subject to approval by the Swedish Competition Authority and the European Commission.
Summary January - June
- Net sales totalled SEK 41,296 m (40,049), an increase of 3.1%.
- Retail sales totalled SEK 32,790 m (31,323), an increase of 4.7%.
- Operating profit amounted to SEK 1,653 m (1,573). Operating profit in the prior year period included items affecting comparability of SEK -119 m. The operating margin was 4.0% (3.9).
- Adjusted operating profit amounted to SEK 1,653 m (1,692). The adjusted operating margin amounted to 4.0% (4.2).
- Net profit for the period amounted to SEK 1,143 m (1,103) and earnings per share before dilution
to SEK 5.28 (5.13).
Axfood will present the interim report for the second quarter 2024 in a webcast at 9:30 a.m. (CET) today, 12 July 2024. The report will be presented by Klas Balkow, President and CEO, and Anders Lexmon, CFO. You can find a link to the webcast at axfood.com. A link to register to participate via conference call is also available at axfood.com. Upon registration, a telephone number and conference ID for the conference call will be provided.
For further information, please contact:
Alexander Bergendorf, Head of Investor Relations, Axfood AB, tel +46 73 049 18 44
The information herein is such that Axfood AB (publ) is required to make public in accordance with the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person listed above, at 7:00 a.m. CET on 12 July 2024.
This document is an English translation of the Swedish original. In the event of any discrepancies, the Swedish version shall govern.