Lidl has become a major threat to Ica!
The Swedish food giants Ica and Axfood are threatened by the German super discounter Lidl, and by the long-time underdog in the Swedish market; Coop!
At least that is what SEB (Skandinaviska Enskilda Banken), a Swedish bank, writes in an analysis of the listed food giants. SEB recommends its clients to sell their shares in Axfood and ICA, writes the business magazine Fri Köpenskap.
In a customer analysis, SEB describes the various difficulties Ica and Axfood (owns Hemköp and Willys) will encounter. The bank believes that Axfood's investment in e-commerce through organic investments and housing purchases is right, but still the bank argues that Axfood's profitability may fall during the conversion phase, according to the news agency Direct.
For Ica's part, SEB lower its recommendation because the bank believes that the operating margin of the grocery giants may decrease, and predicts that stores in the Baltic countries will reduce their turnover in the next two to three years.
When the two giants are experiencing difficulties, it rolls and works well for Coop, according to SEB.
The German food giant Lidl is struggling from a challenging position in the Swedish market, but constantly receives an increasingly faithful clientele, which may threaten the two biggest players in the Swedish market in the long run.
ICA's ownership structure is also challenging, resonates SEB. The merchants own 51 percent of the capital and voting rights. This fact can create significant contradictions between shareholders in the medium term, experts claim.
ICA and Axfood drops from "exceptionally high levels"
According to the bank Ica and Axfood will probably lose both market share and profitability from an exceptionally high level to a more normal level. Hence the target prices are lowered from 155 to 125 kronor for Axfood, and from 300 to 255 for Ica.