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Introduction & Market Context
Swedish food retailer Axfood AB (STO:AXFO) presented its Q1 2025 results on April 24, showing continued market share gains and sales growth that significantly outpaced the overall food retail market. The company’s stock responded positively, rising 2.95% to SEK 254.80 during the trading session.
Axfood demonstrated strong momentum in its core operations while navigating challenges with the newly acquired City Gross chain, which remains in transformation mode. The company’s retail sales increased by 15.7% year-over-year, substantially outperforming the food retail trade index growth of 1.9%.
As shown in the following comparative growth chart, Axfood’s performance exceeded market benchmarks by a significant margin:
Quarterly Performance Highlights
Axfood reported consolidated net sales of SEK 21,040 million in Q1 2025, representing a 3.9% increase from SEK 20,252 million in Q1 2024. The company’s operating profit was SEK 719 million, down from SEK 817 million in the same period last year, with adjusted operating profit of SEK 757 million (excluding items affecting comparability).
The detailed breakdown of sales and profit by business segment reveals varied performance across the company’s portfolio:
The operating profit breakdown shows Willys and Dagab as strong performers, while City Gross posted significant losses as it undergoes transformation:
Willys, Axfood’s discount grocery chain, continued to demonstrate robust performance with net sales increasing by 3.0% (like-for-like growth of 1.2%) to SEK 11,581 million. Operating profit rose 2.3% to SEK 495 million, maintaining a stable operating margin of 4.3%. The chain saw a 5.1% growth in Willys Plus members compared to Q1 2024, indicating strengthening customer loyalty.
Hemköp reported a 5.1% increase in net sales to SEK 2,055 million, with retail sales growth of 3.1% (like-for-like 2.9%). However, operating profit decreased 6.6% to SEK 94 million, with operating margin declining to 4.6% from 5.2% in Q1 2024.
Strategic Initiatives
The recently acquired City Gross hypermarket chain remains a significant challenge, reporting an operating loss of SEK 118 million in Q1 2025, or an adjusted loss of SEK 80 million excluding items affecting comparability. Retail sales declined by 3.8% (like-for-like -3.3%).
Axfood outlined a comprehensive transformation plan for City Gross focused on five key areas:
Dagab, Axfood’s wholesale and logistics operation, showed solid growth with net sales increasing by 3.5% to SEK 19,173 million and operating profit rising 7.0% to SEK 287 million. The operating margin improved to 1.5% from 1.4% in Q1 2024.
A key operational achievement was the completed ramp-up of the Bålsta logistics center, which has achieved significant productivity gains:
Looking ahead, Axfood is planning to expand its logistics capacity in southern Sweden from 2030 to support continued growth. The company noted that Dagab’s volume has grown by 27% in recent years, necessitating additional infrastructure investments.
Detailed Financial Analysis
Cash flow from operating activities decreased to SEK 1,232 million in Q1 2025 from SEK 1,695 million in Q1 2024, primarily due to changes in net working capital:
The company’s financial position shows increased leverage, with equity ratio impacted by higher net debt. The first part of the dividend payment was made in March, amounting to SEK 971 million (SEK 4.50 per share):
Capital efficiency metrics show stable working capital management and return on capital employed:
Forward-Looking Statements
Axfood maintained its outlook for 2025, projecting capital expenditures of SEK 1,600-1,700 million and plans to establish 10-15 new Group-owned stores. The company expects items affecting comparability of approximately SEK 100 million.
The company’s focus remains on strengthening market positions across its portfolio, with particular emphasis on improving City Gross performance. The logistics infrastructure expansion plans signal confidence in long-term growth prospects.
Axfood will hold its Capital Markets Day on September 18, 2025, where it is expected to provide more details on its long-term strategic initiatives and financial targets.
In the current trading environment, Axfood continues to benefit from its multi-format approach, with the discount segment (Willys) showing particular strength amid consumer price sensitivity. The company’s market share gains in Q1 2025 demonstrate its competitive resilience, though the ongoing transformation of City Gross will likely remain a drag on overall profitability in the near term.
Full presentation:
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