Axfood (AXFO) Q2 2024 earnings summary

Executive summary

• Retail sales grew 2.6% year-over-year in Q2 2024, outpacing the market despite low inflation and challenging comparables, with e-commerce sales up 7.4% and online penetration at 5.2%.

• Progress continued on logistics restructuring, though short-term costs and operational disruptions impacted profitability.

• The acquisition of City Gross expands presence in the hypermarket segment, with agreement signed to acquire 90.1% and closing subject to regulatory approval.

• The CEO announced his departure, with Simone Margulies named as successor; new Managing Director appointed for Hemköp, effective August 2024.

Financial highlights

• Group net sales rose 1.2% year-over-year to SEK 21,044m in Q2; retail sales up 2.6%, e-commerce up 7.4%.

• Operating profit was SEK 836m (down 4.8%), with adjusted operating margin at 4.0% (down from 4.5%).

• H1 2024 net sales rose 3.1% to SEK 41,296m; H1 operating profit increased 5.1% to SEK 1,653m.

• Cash flow from operating activities in H1 was SEK 2,574m, up from SEK 2,165m; Q2 cash flow was SEK -174m, mainly due to working capital.

• Equity ratio at quarter-end was 21.1%; net debt/EBITDA stable at 1.5.

Outlook and guidance

• 2024 outlook unchanged: planned investments of SEK 1,600–1,700m, including SEK 300m for logistics automation.

• Plan to establish 10–15 new Group-owned stores during the year.

• City Gross acquisition expected to dilute operating margin by ~0.3pp at closing, with positive EPS contribution by 2026 at the latest.

• Long-term targets: grow faster than the market, operating margin ≥4.5%, equity ratio ≥20%.

• Efficiency improvements from logistics restructuring expected to materialize gradually in H2, though some transition costs will persist.