Axfood summarises a quarter with higher volumes in a market characterised by a particularly high activity rate ahead of the Easter holidays and the reduction of VAT on food that came into effect on 1 April. Sales growth was lower than what we had hoped for, however through a clear customer focus and improved efficiency, we are creating value throughout the entire value chain and increased our earnings.
Overall, the food retail market performed well in the first quarter of
the year. As food price inflation gradually declined during the quarter,
growth was primarily driven by volume and a slightly positive calendar
effect from the timing of Easter, an important holiday for the industry.
The market remains highly competitive and continues to be
characterised by a strong focus on price value, with a particularly high
activity level ahead of the temporary reduction of VAT on food that
came into effect on 1 April.
Global uncertainty has clearly increased, with geopolitical
turbulence affecting global supply chains. While it is currently difficult
to assess the long-term effects of the war in the Middle East, Axfood
noted a slight negative impact late in the quarter, in the form of higher
fuel costs and a weaker krona. We are monitoring developments and
have successfully navigated the uncertain environment of recent years,
adapting quickly as conditions have changed.
Growth driven by higher volumes, and increased earnings
With positive customer traffic and higher volumes, Axfood’s retail sales
increased 3.8% in the first quarter of the year, which was below market
growth of 4.4%. Excluding City Gross, where sales were impacted by
store closures, Axfood's growth was in line with the market. Our
financial performance was strong, with increased profitability primarily
driven by the higher sales volume, effective cost control and improved
productivity.
Along with our focus on strengthening our customer meetings and
driving growth in our store chains, we worked intensively during the
quarter to prepare for and implement the reduction of VAT on food.
Through extensive collaboration and a focus on execution throughout
the organisation – from stores and support functions to Dagab and
Axfood IT – the price points on millions of items were updated in a very
short amount of time.
Strong customer-focused concepts
Our discount chain, Willys, continued to attract additional customers
and increase its volumes during the quarter, growing 3.8%. In
connection with the VAT reduction, Willys chose to strengthen its
position as Sweden’s leading discount chain by leading the way and
reduce its prices two days early. A large share of its marketing
activities were concentrated to the end of the quarter, which
negatively impacted profitability. Willys’ expansion activities were also
concentrated to the end of the quarter, with two new stores opening in
late March, and the aim is to maintain a high rate of expansion based
on the chain’s strong position among consumers.
Hemköp performed very well and posted a clear increase in market
share during the quarter, delivering growth of 5.9%. Like-for-like
growth was also strong at 4.0%, contributing to a solid earnings
performance. With a focus on rapidly modernising the store base and
enhancing its offering in terms of price value, fresh produce and meal
solutions, Hemköp has made excellent progress in recent years. The
growth we are experiencing clearly demonstrates that customers truly
appreciate Hemköp.
Our efforts to develop City Gross into a long-term competitive
hypermarket chain is proceeding according to plan, and City Gross
continued to deliver a positive performance in the first quarter. The
store chain once again reported healthy like-for-like growth of 3.6%
and a positive earnings trend. Our improvement initiatives aimed at
developing the customer offering and streamlining operations are
yielding results, and our ambition is still to reach profitability in the
second half of the year.
Our restaurant wholesaler, Snabbgross, successfully offset weak
growth of 1.0% through strict cost control, delivering earnings on a par
with last year.
Clear direction for value creation
In summary, we have closed the books on a quarter with positive
customer traffic, volume growth and higher profitability. We are
investing in line with our long-term plan to gain further market share
and create the right conditions for continued profitable growth.
I am glad that our clear focus on efficiency and productivity
improvements strengthens our competitiveness. We are enhancing the
way we work, increasing the use of data and AI, and further optimising
product flows and our new logistics structure. Through innovation, we
are also developing our assortment to create attractive offerings and
make it easier for customers to choose sustainable and healthy
options. I also take a positive view on our high rate of store expansion
and modernisation, which is creating new growth opportunities.
Equally self-evident is our continued focus on diversity, inclusion, and
climate. Axfood is thus well positioned to continue creating long-term
value for its customers, employees and owners, and for society at large.
