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1. Company Snapshot

1.a. Company Description

Axfood AB (publ) engages in the food retail and wholesale businesses in Sweden.It operates through Willys, Hemköp, Dagab, and Axfood Snabbgross segments.The company operates its retail business through Willys, Hemköp, and Eurocash chains; and the online store, Mat.se.


It is also involved in the e-commerce business; and provision of private label products.In addition, it offers home delivery of meal kits under the Middagsfrid name, as well as operates Urban Deli, a combined restaurant and market hall concept; and Apohem, an online pharmacy solution.The company serves restaurants, foodservice operators, and cafés; and retailer-owned stores, mini-marts, service stations, and other convenience retailers.


It operates 65 Hemköp, 219 Willys, and 26 Snabbgross group-owned stores; and 133 Hemköp and 126 Tempo franchises.The company was founded in 1958 and is headquartered in Stockholm, Sweden.Axfood AB (publ) is a subsidiary of Axel Johnson AB.

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1.b. Last Insights on AXFO

Axfood AB's recent performance was driven by robust retail sales growth and strategic acquisitions. The company's Q4 2024 earnings call highlighted strategic growth amidst market challenges. Axfood reported a 12.6% increase in retail sales, driven by its successful acquisitions, including the purchase of Hemköp. The company's focus on strategic growth and expansion has positioned it for long-term success. Axfood's recent acquisition of Hemköp is expected to contribute to future growth, and the company's share buyback program will help reduce outstanding shares and increase earnings per share."

1.c. Company Highlights

2. Axfood's Strong Q4 Performance Driven by Organic Growth and Acquisition

Axfood reported a robust fourth-quarter performance, with consolidated net sales growing 4.4% to SEK 22.6 billion and an operating profit of SEK 860 million, translating to an operating margin of 3.8%. Earnings per share (EPS) came in at SEK 2.59, beating estimates of SEK 2.57. The group's net sales for the full year increased by 6.1% to approximately SEK 89 billion, while operating profit, excluding items affecting comparability, rose 7.4% to nearly SEK 3.7 billion. The strong performance was driven by an 8.7% retail sales growth in the quarter, outpacing the market growth of 4.5%, with Willys and Hemkop demonstrating positive performance.

Publication Date: Feb -04

📋 Highlights
  • Quarterly Retail Sales Growth:: Axfood's retail sales rose 8.7% YoY in Q4, outpacing market growth of 4.5%, driven by strong performance at Willys, Hemkop, and City Gross.
  • Operating Profit Expansion:: Consolidated operating profit hit SEK 860 million with a 3.8% margin, up from prior periods, despite City Gross drag of -0.2% on margins.
  • City Gross Transition:: Acquired in Nov 2024, City Gross reported SEK 28 million adjusted profit (1.2% margin) in Q4, with profitability expected by H2 2026.
  • Capital Employed and ROI:: Group net sales reached SEK 89 billion (6.1% YoY growth), but return on capital employed fell to 15.5% amid rising investments.
  • 2026 Investment Outlook:: Axfood plans SEK 2.2–2.3 billion in 2026 investments, including EUR 265 million for Kungsbacka logistics automation and 10–15 new stores.

Segment Performance

Willys' operating profit increased to SEK 467 million, maintaining a stable operating margin of 3.7%. Hemkop's operating profit was higher at SEK 78 million, with an operating margin of 3.5%. City Gross, acquired in November 2024, contributed positively with an adjusted operating profit of SEK 28 million and an operating margin of 1.2%. Dagab's net sales grew by almost 5%, driven by sales to Axfood's own concepts, with an operating profit of SEK 314 million.

Cash Flow and Balance Sheet

Axfood generated a cash flow of SEK 345 million, a significant improvement from the previous year, primarily due to strong underlying operating cash flow. The equity ratio stood at 21.2%, exceeding the year-end target of 20%. The return on capital employed decreased to 15.5% despite improved operating profit, largely due to increased capital employed resulting from acquisitions and logistics investments.

Valuation and Outlook

With a P/E Ratio of 29.78 and an ROE of 35.56%, Axfood's valuation appears to reflect its strong growth prospects. The company's guidance for 2026 includes investments totaling SEK 2.2 billion to SEK 2.3 billion, with a focus on expanding its store network and enhancing its logistics capabilities. As Simone Margulies stated, "We're issuing an outlook for 2026, focusing on investing in our business to strengthen competitiveness and create value for stakeholders." Analysts estimate next year's revenue growth at 4.7%, indicating a continued positive trajectory for the company.

Future Initiatives and Challenges

Axfood is poised to continue its growth trajectory, driven by its house of brand strategy and investments in its logistics and store network. The company is also focusing on sustainability, aiming to electrify 50% of its own transport fleet by 2030 and reduce emissions in operations by at least 70% by 2030. However, the company faces challenges, including a competitive market and potential impacts from the halving of food VAT, which may influence consumer behavior and pricing strategies.

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.52%)

6. Segments

Willys

Expected Growth: 3.5%

Willys from Axfood AB (publ) achieves 3.5% growth driven by increasing demand for convenient and affordable grocery shopping, successful private label expansion, and strategic store renovations. Additionally, investments in e-commerce and digital marketing enhance customer experience, contributing to sales growth.

Dagab

Expected Growth: 3.2%

Dagab's 3.2% growth is driven by increasing demand for online grocery shopping, strategic partnerships with food producers, and efficient logistics management. Additionally, Axfood AB's strong brand portfolio and focus on sustainability contribute to Dagab's growth. Furthermore, investments in digitalization and e-commerce capabilities have enhanced the customer experience, driving sales and revenue growth.

Home Purchase

Expected Growth: 4.5%

Axfood AB's 4.5% growth in Home Purchase segment is driven by increasing consumer preference for online grocery shopping, strategic partnerships with food delivery services, and expansion of its e-commerce platform. Additionally, the company's focus on private labels, competitive pricing, and improved logistics have contributed to the growth.

Quick Gross

Expected Growth: 3.8%

Axfood AB's 3.8% Quick Gross growth is driven by increasing market share in the Swedish food retail market, successful private label expansion, and effective cost control measures. Additionally, strategic investments in e-commerce and digitalization have enhanced customer experience, contributing to the growth.

Reconciling Items

Expected Growth: 3.0%

Axfood AB's 3.0% growth is driven by increasing market share in the Swedish food retail market, successful implementation of its e-commerce strategy, and effective cost control measures. Additionally, the company's focus on private label products and strategic partnerships with suppliers have contributed to the growth.

7. Detailed Products

Dagab

A grocery retail chain offering a wide range of food and non-food products

Hemköp

A grocery retail chain focusing on fresh produce and meat, with a strong emphasis on quality and sustainability

Willys

A discount grocery retail chain offering affordable prices on a wide range of products

Axfood Närlivs

A convenience store chain offering a wide range of convenience products and services

M Matkassen

A meal kit delivery service offering pre-measured ingredients and recipes

Snabbgross

A wholesale business offering a wide range of food and non-food products to professional customers

8. Axfood AB (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

Axfood AB (publ) operates in the food retail industry, where substitutes are readily available. However, the company's strong brand presence and customer loyalty mitigate the threat of substitutes.

Bargaining Power Of Customers

Axfood AB (publ) operates in a competitive market, but its strong brand presence and customer loyalty reduce the bargaining power of customers.

Bargaining Power Of Suppliers

Axfood AB (publ) relies on a diverse supplier base, which reduces the bargaining power of individual suppliers. However, the company's dependence on a few large suppliers increases the bargaining power of these suppliers.

Threat Of New Entrants

The food retail industry has high barriers to entry, including significant capital requirements and regulatory hurdles, which reduce the threat of new entrants.

Intensity Of Rivalry

The food retail industry is highly competitive, with several established players competing for market share. Axfood AB (publ) faces intense competition from rivals such as ICA Gruppen and Coop Sverige.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 58.67%
Debt Cost 4.95%
Equity Weight 41.33%
Equity Cost 4.95%
WACC 4.95%
Leverage 141.98%

11. Quality Control: Axfood AB (publ) passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Sainsbury

A-Score: 6.9/10

Value: 6.6

Growth: 7.6

Quality: 2.3

Yield: 9.4

Momentum: 7.5

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Axfood

A-Score: 5.9/10

Value: 3.9

Growth: 5.8

Quality: 4.1

Yield: 5.6

Momentum: 7.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Kesko

A-Score: 5.6/10

Value: 5.4

Growth: 4.2

Quality: 3.8

Yield: 7.5

Momentum: 3.5

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
Carrefour

A-Score: 5.3/10

Value: 7.0

Growth: 4.4

Quality: 1.6

Yield: 6.9

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Greggs

A-Score: 5.0/10

Value: 6.8

Growth: 6.4

Quality: 5.6

Yield: 6.2

Momentum: 0.5

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Colruyt

A-Score: 5.0/10

Value: 6.7

Growth: 4.6

Quality: 4.2

Yield: 5.6

Momentum: 1.0

Volatility: 7.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

326.1$

Current Price

326.1$

Potential

-0.00%

Expected Cash-Flows