Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Retail sales grew by 2.6%, driven by continued volume growth and a strong inflow of customers.
- E-commerce sales increased by 7.4%, outperforming the market, with a 5.2% share of consumer sales from e-commerce.
- Willys posted solid growth and Hemköp showed strong like-for-like development, contributing positively to overall performance.
- The company made significant progress with its new logistical structure, including the ramp-up of frozen food volumes at the new logistics center in Bålsta.
- Axfood AB (FRA:AXL1, Financial) signed an agreement to acquire the City Gross hypermarket chain, which is expected to provide additional growth opportunities and increased competition in the hypermarket segment.
Negative Points
- Consolidated net sales grew only by 1.2% during the quarter, which is relatively low.
- The development for Dagab held back total growth due to softer sales to external customers and a negative calendar effect.
- Adjusted operating profit decreased due to higher-than-anticipated transition costs and operational disruptions.
- The company incurred acquisition-related costs of SEK26 million for the City Gross acquisition, impacting profits negatively.
- Temporary operational disruptions in the stores' payment system in May had an estimated negative impact on profits of SEK20 million.
Q & A Highlights
Q: Can you share any changes in consumer behavior, particularly in basket mix, during the last quarters?
A: Overall, we haven't observed significant changes in consumer behavior. The market volume is recovering from a soft 2023, and while there are some positive economic signals, consumer patterns and price value focus remain consistent.
Q: How should we think about Dagab's performance in the second half of the year, considering the higher cost levels and efficiency gains?
A: We experienced soft sales and operational disruptions in Dagab, but we are optimistic about efficiency improvements starting in the second half. Although we are a couple of months behind schedule, we expect to see significant cost reductions and efficiency gains moving forward.
Q: Can you provide more details on the NOK20 million impact from the payment system hiccup in May?
A: The NOK20 million impact includes both lost sales and additional staffing costs to manage the situation. The sales impact was significant for May but not for the entire quarter.
Q: Are there any more acquisition-related costs expected in Q3 following the SEK26 million incurred in Q2?
A: No, the acquisition-related costs have been fully accounted for in Q2.
Q: How many old warehouses have been closed to date, and how many do you expect to close in the second half of 2024 or beyond?
A: We are still working on the timing and coordination with employees for closing warehouses. The decision to keep certain warehouses open is to optimize logistical flows and does not change our efficiency improvement targets.
Q: Do you see the soft sales in Dagab as a permanent shift or something temporary?
A: The soft sales are partly due to the challenging market environment for smaller store formats and external customers. We expect to see higher growth moving forward, which will drive efficiencies and profit development in Dagab.
Q: With volumes returning in the market, have you seen any improvement in gross margins for Willys and Hemköp?
A: The market remains highly competitive, and consumer patterns have not significantly changed. We have not seen a notable improvement in gross margins yet.
Q: Will the efficiency gains from Dagab's new logistical structure be realized in 2024 or pushed to 2025?
A: The target for efficiency gains remains unchanged, but they will be realized more gradually during the second half of 2024 due to the delays.
Q: How do you expect Axfood to perform relative to the market going forward?
A: We aim to continue outgrowing the market. Willys and Hemköp have strengthened their market positions, and we have additional growth opportunities, including the City Gross acquisition.
Q: Can you provide more details on the transition costs and their impact on Q3?
A: Transition costs were higher than expected in Q2 due to delays, but we anticipate lower costs in Q3 as we complete the transition. The remaining transition costs are estimated to be around NOK25 million to NOK30 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
