Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Axfood AB (FRA:AXL1, Financial) reported a 3.5% increase in retail sales, indicating a positive trend in consumer traffic.
- E-commerce sales for Axfood AB (FRA:AXL1) increased by 10.2%, outperforming the market and demonstrating strong online presence.
- The Hemköp segment showed strong growth with a 4.5% increase in like-for-like sales, driven by effective cost control and store modernization.
- Snabbgross, Axfood AB (FRA:AXL1)'s restaurant wholesaler, experienced a 5.6% growth in the quarter, reflecting a strong market position.
- Axfood AB (FRA:AXL1) received approval from the Swedish Competition Authority for the acquisition of City Gross, which is expected to enhance competitiveness in the hypermarket segment.
Negative Points
- Operating profit for Axfood AB (FRA:AXL1) declined, with adjusted operating profit amounting to approximately SEK 1 million, impacted by price investments and high cost inflation.
- Willys, a leading discount retailer under Axfood AB (FRA:AXL1), experienced negative profit development due to price investments and high cost inflation.
- The transition to a new logistics structure incurred additional costs of approximately SEK 20 million, affecting overall profitability.
- Axfood AB (FRA:AXL1) faced a negative cash flow of SEK 358 million in the third quarter, primarily due to negative cash flow from networking capital.
- The acquisition of City Gross will result in a negative profit effect of SEK 120 million to SEK 160 million in the fourth quarter due to revaluation.
Q & A Highlights
Q: On the margin contraction in Willys, how much is due to price investments versus general cost inflation? Why were these price measures taken now and not earlier in the year?
A: Simone Margulies, President of Axfood AB, explained that the profitability was mainly affected by price investments, which also led to volume increases and enhanced brand loyalty. The timing was not specific to this quarter as Willys continuously works to maintain its promise of offering Sweden's cheapest groceries.
Q: Could you provide an update on the status of your parallel warehouses and the plan for closing them?
A: Simone Margulies stated that they are rebalancing volumes and have closed one warehouse. The plan is not to close all remaining warehouses, as some are kept for service trade. The ramp-up at the BÃ¥lsta site is complete, and they are focusing on balancing operations for efficiency.
Q: How do you see procurement costs in relation to global food commodity price declines? Are there opportunities for negotiation?
A: Simone Margulies noted that they continuously negotiate with suppliers to optimize pricing. This ongoing effort involves both private label and branded suppliers to ensure cost efficiency.
Q: Regarding the acquisition of City Gross, what can you say about the operational development and future plans?
A: Simone Margulies mentioned that Axfood will take over City Gross on November 1 and will develop a plan to strengthen the brand and store concept. The goal is to make the chain profitable by 2026, considering factors like concept optimization and store network.
Q: Can you comment on the cost savings from the logistics restructuring and when they will be realized?
A: Simone Margulies confirmed that the plan for cost savings is still in place, with some delays. They expect to start realizing savings of SEK 200-300 million in 2025, with no extra costs anticipated by then.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
