• Net Sales Growth: Increased by 3.6% to SEK84 billion for the full year.
• Retail Sales Growth: Increased by 6.8%, excluding City Gross, retail sales increased by 4.3%.
• Adjusted Operating Profit: SEK3.4 billion, a decrease of SEK169 million from the previous year.
• Operating Margin: 4.1%, excluding items affecting comparability, 0.4 percentage points lower than last year.
• Cash Flow from Operating Activities: SEK347 million lower in Q4 compared to the prior year.
• Investment in City Gross: Almost SEK1.6 billion.
• Net Debt: Increased due to the acquisition of City Gross, including SEK2 billion in leasehold debt.
• Equity Ratio: 20.9% at year-end.
• New Store Establishments: 12 new group-owned stores in 2024, plus 42 hypermarkets from City Gross acquisition.
• Dividend Proposal: SEK8.75 per share, split into two payments.

• Warning! GuruFocus has detected 4 Warning Signs with STU:AXL1.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Axfood AB (STU:AXL1) reported a strong operational development in 2024, with increased customer traffic, loyalty, and volume growth.
• The company successfully acquired City Gross, enhancing its market presence and expanding its reach in the hypermarket segment.
• Axfood AB (STU:AXL1) achieved a 14% increase in retail sales in the fourth quarter, significantly outperforming the market growth rate.
• E-commerce sales grew by over 7% in the quarter, with a strong presence in this channel, surpassing market penetration.
• The company made substantial progress in sustainability, reducing its carbon footprint by over 30% in its transport operations compared to the previous year.

Negative Points

• Axfood AB (STU:AXL1) faced pressure on its gross margin due to intense competition and high-cost inflation, particularly in personnel and rent.
• The acquisition of City Gross resulted in a negative operating profit of SEK40 million, with challenges in achieving profitability expected until the second half of 2026.
• The company's net debt increased significantly due to the acquisition of City Gross and higher leasehold debt, impacting its financial position.
• Operating profit was affected by items of minus SEK143 million related to the reevaluation of the minority stake in City Gross.
• Cash flow from operating activities was lower compared to the previous year, mainly due to negative calendar effects in net working capital.

Q & A Highlights

Q: Can you explain the profitability trajectory at Willys, particularly the differences in EBIT margin between Q3 and Q4, and what should be expected for 2025? A: The profitability at Willys is influenced by several factors, including high volume growth and intense competition. The margins are affected by customer mix, campaign mix, and product mix, as well as seasonal factors in December. While Q3 was weaker than usual, Q4 saw a more positive volume effect. However, no specific forecast for 2025 margins was provided, as many factors, including market dynamics and product mix, will influence the outcome.

Q: The net debt has increased significantly compared to last year. Can you clarify the components contributing to this increase? A: The increase in net debt is primarily due to SEK 2 billion in leasehold related to City Gross, an additional SEK 2 billion in external loans, and approximately SEK 1 billion from revaluation of old and new rental contracts. This sums up to the SEK 5 billion increase in net debt.

Q: What is the ambition for store openings in 2025, considering the rightsizing of City Gross and potential closures? A: Axfood plans to open 10 to 15 new stores in 2025, with a positive net effect expected from these openings. Structural measures will be taken at a handful of City Gross stores, with most being converted to other concepts within the group.

Q: Can you discuss the margin development at Hemkop, which differed from Q3? A: Hemkop's margin was impacted by the establishment of three new stores, which is significant for the chain. It takes time to establish in new markets, affecting results. This impact is expected to even out over time.

Q: Regarding City Gross conversions, are these primarily into Willys stores? A: Structural measures will be taken at a handful of City Gross stores, with the majority being converted into other store concepts within the group. The specific details are still being worked out, and updates will be provided once finalized.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.