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Introduction & Market Context
Axfood AB (STO:AXFO) reported growth across all business segments in its Q3 2025 results presentation released on October 23, 2025. Despite the positive performance metrics, Axfood's stock fell 5.31% on the day to SEK 271.2, suggesting investors may have had higher expectations.
The Swedish food retail group highlighted consistent market outperformance with retail sales growth of 19.5% overall and 6.2% excluding City Gross, compared to total market growth of 5.4%. The company's market share increased slightly to 25.2% from 25.1% in 2023, continuing a decade-long trend of steady market share gains.
As shown in the following chart of Axfood's market share development and retail sales growth compared to the overall market:
Quarterly Performance Highlights
Axfood reported Q3 2025 net sales of SEK 22,286 million, representing a 6.6% increase from the previous year. The adjusted operating profit rose to SEK 1,099 million from SEK 1,007 million in Q3 2024, with adjusted operating margin improving slightly to 4.9% from 4.8%.
All operating segments showed positive profit development, driven by strong sales growth, higher productivity, and solid cost control. The company's e-commerce sales increased by 11.3% (5.6% excluding City Gross and Middagsfrid), outperforming the market growth of 8.4%.
The detailed breakdown of net sales and operating profit by segment reveals strong performance across the company's portfolio:
Willys, Axfood's largest segment, delivered a 6.2% increase in net sales to SEK 12,076 million, with like-for-like sales growth of 4.1%. The segment's operating profit rose 5.5% to SEK 587 million, maintaining an operating margin of 4.9%. Willys reached a milestone of 250 stores in October 2025, reflecting the company's accelerated expansion pace.
Hemköp reported a 7.1% increase in net sales to SEK 1,995 million, with retail sales growth of 6.2% and like-for-like growth of 4.8%. Operating profit improved by 9.6% to SEK 103 million, maintaining an operating margin of 5.1%. The segment outperformed its peers in the traditional grocery segment, showing stronger trends in household penetration and loyalty.
The operating profit breakdown across all segments demonstrates the company's balanced performance:
City Gross, which Axfood acquired recently, showed signs of improvement with like-for-like sales growth of 3.2%, though it still operated at a loss with an adjusted operating margin of -0.2%. The company continues to implement improvement initiatives to strengthen City Gross's market position.
Snabbgross delivered the strongest margin improvement, with operating profit increasing 18.3% to SEK 101 million and operating margin rising to 6.3% from 5.6%. Dagab, Axfood's wholesale operation, saw operating profit increase by 9.3% to SEK 341 million with an operating margin of 1.7%.
Strategic Initiatives
Axfood announced plans to establish a new logistics center in Kungsbacka to increase efficiency and capacity in southern Sweden. The facility, designed to handle all temperature zones for food retail, will be approximately 90,000 square meters with 90% automation and will increase capacity by 20%. The ramp-up is expected to begin in 2030, primarily replacing the existing warehouse in Backa, Gothenburg.
The following image provides details about the new logistics facility:
Willys continues its expansion strategy, adding one new store and converting one City Gross store during the quarter. The chain's total network reached 256 stores, up from 244 in the previous year. The expansion trend is clearly illustrated in this chart:
Hemköp maintained its store network at 326 locations, focusing on store modernizations. The company reported strong performance in the traditional grocery segment, outperforming peers with increases in household penetration and loyalty.
City Gross, despite operating at a loss, showed positive trends in like-for-like sales. The company closed its Borlänge store ahead of a concept change to Willys, part of Axfood's strategy to optimize the City Gross network. The positive trend in City Gross's like-for-like sales is shown in the following chart:
Financial Position & Outlook
Axfood maintained a strong financial position with robust cash flow from operating activities of SEK 1,352 million in Q3 2025, up from SEK 1,013 million in Q3 2024. The company's leverage, equity ratio, and investments reflect its strategic focus on growth and efficiency:
For the full year 2025, Axfood revised its outlook, now planning to establish 9 new Group-owned stores (down from the previous guidance of 10-15) due to timing of certain new store establishments. In addition, the company plans to establish 3 new retailer-owned stores from competing chains. Capital expenditures are expected to be between SEK 1,600-1,700 million, excluding acquisitions and leasehold.
The company also revised its estimate for items affecting comparability to approximately SEK 115 million (up from SEK 100 million), mainly related to structural costs for City Gross stores undergoing concept changes.
Competitive Industry Position
Axfood highlighted four key elements of its competitive edge: a house of brands with distinctive concepts addressing varying consumer needs; an attractive store network with significant expansion potential; a highly integrated value chain enabling cost efficiencies; and scale advantages from its large market presence.
The company's consistent outperformance of the market and steady increase in market share from 17.6% in 2015 to 25.2% in 2025 demonstrate the effectiveness of its strategy. Return on capital employed stood at 16.4%, slightly impacted by the City Gross acquisition but still reflecting strong operational efficiency.
This performance aligns with the trends observed in Q2 2025, when Axfood reported a 9% increase in net sales and strong e-commerce growth. The company's focus on renewable energy and operational efficiency, highlighted in the Q2 results with the launch of Sweden's largest solar park, continues to be a strategic priority.
Despite the positive operational performance, the market reaction suggests investors may have been looking for even stronger results or more aggressive growth projections, particularly regarding the reduced store expansion target for 2025.
Full presentation:
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