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Klas Balkow: ” We are taking further steps in our development and continuing to strengthen our market position"

Klas Balkow: ” We are taking further steps in our development and continuing to strengthen our market position"

During the third quarter, Axfood continued to report strong growth and stable profitability, a testament to the fact that our customers appreciate our affordable and competitive offering. At the same time, we continued to pursue our extensive development agenda to strengthen our position for the future, and we took major steps in the establishment the Group’s new warehouse and logistics structure during the quarter.

Annual food price inflation continued to slow considerably in the third quarter. However, there is still uncertainty concerning future developments due to various factors, such as the turbulent global situation, extreme weather and the weak Swedish krona. The current inflation rate is putting a strain on household finances, and it is clear that consumers are continuing to focus on price value and low prices.

Continued momentum thanks to strong growth

Despite high comparison figures, Axfood delivered robust growth of 13% during the quarter, compared with 6% growth in the food retail industry. Axfood’s growth was thus twice as high as the market’s, which follows the trend we have seen since the beginning of last year. Willys once again reported exceptional growth, reaching an impressive 16% this quarter. The number of new customers and members of Willys Plus is continuing to grow at a rapid rate, and new and existing customers alike are becoming increasingly loyal and shopping more at the chain.

With a clear focus on price value, Hemköp grew faster than the market for the fourth consecutive quarter. In a market that mainly favours the low-price players, Hemköp delivered a strong performance. It is truly gratifying to see a return on the chain’s investment in store modernisation and assortment development, with a focus on health and sustainability.

At the same time, we are seeing a certain slowdown in the café and restaurant market from previously high levels. Nevertheless, Snabbgross’s focus on an affordable and flexible offering generated favourable growth, resulting in a higher market share.

Increased earnings and stable profitability

In line with the trend in the first half of the year, operating profit increased in the third quarter, and the adjusted operating margin was on a par with the previous year. This profit trend was attributable to the Group’s strong sales
growth, which compensated for the continued market investments in the store chains, negative currency effects and higher operating expenses, such as increased rental levels and salary costs.

Continued scale-up of new logistics platform

Our new highly automated logistics centre in Bålsta outside Stockholm is a large-scale project that represents a completely new way of running our warehouse and logistics operations. The transition to Bålsta progressed during the quarter, with a focus on continuing to scale up and stabilise the operations. A growing number of stores and larger volumes were connected to the flow of the dry range during the quarter, and the first deliveries of refrigerated items from Bålsta to stores were recently made.

In addition to scaling up the centre in Bålsta, we also continued our efforts to strengthen other parts of our new logistics platform. Planning for the new high-bay warehouse in Backa, Gothenburg, is under way, and at the new fruit and vegetable warehouse in Landskrona, testing of IT solutions and control systems is ongoing now that the automation solution has been fully installed.

Promoting a sustainable food strategy for Sweden

While focusing on delivering affordable, good and sustainable food here and now, and developing our operations to enable greater efficiency going forward, we must not lose sight of the longer-term challenges. We recently presented a new version of Food 2030, Axfood’s proposal for a sustainable food strategy, filled with 125 recommendations that can make a real difference in accelerating the green transition. As a leading player in the food retail industry, we want to take the lead in promoting a sustainable food system in Sweden, and Food 2030 is an important part of our work to influence decision-makers and drive industry issues.

A strong third quarter

It is with a sense of humility in the face of an uncertain global backdrop that I present a strong third quarter for Axfood. It is clear that more and more customers appreciate the offerings of our various store concepts and operations. Together with all of our dedicated employees, we will maintain a high level of ambition and pace of development in order to further strengthen our position in the market.

Klas Balkow
President and CEO, Axfood AB