Axfood disappoints the market – the share falls after the quarterly report
Axfood delivered its quarterly report for the third quarter on Thursday, 23 October. Despite growth in both sales and market share, the stock exchange reacted with a sharp drop in price. The share fell by more than 7 percent during the day, and analysts point to several factors that explain the negative reaction.
Axfood reported net sales of 20.2 billion Swedish kronor, an increase of 7.5 percent compared to the same quarter last year. Operating profit rose to 1.1 billion kronor, and margins remained stable.
The company highlighted strong organic growth, especially within the grocery chain Willys, and continued positive development in e-commerce.
Nevertheless, it was not enough to meet market expectations. Several analysts had expected even higher growth and a clearer improvement in profitability. According to Dagens Industri, consensus estimates for operating profit were somewhat higher than what Axfood delivered, and this created an expectations gap that triggered selling reactions.
Investments and cost pressure
Another factor causing concern among investors is Axfood's plans for further investments in logistics and automation. The company announced today that it will build a new, highly automated logistics center in Kungsbacka, with a planned start-up in 2027.
Although this may provide significant efficiency gains in the long term, it also entails increased costs and capital tied up in a period when many investors are demanding tighter cost control.
“Axfood has delivered a solid quarter, but the market is reacting to signals of increased investments and a somewhat weaker than expected result. It is a classic reaction when expectations are high,” says analyst Erik Lund at Handelsbanken Markets.
Increased competition and margin pressure
In addition, several experts point out that competition in the grocery market has intensified further, with price pressure from both discount chains and new players. This may have contributed to Axfood's failure to improve margins at the same pace as in previous quarters.
The company itself acknowledges that the market is demanding but emphasizes that they have strengthened their position.
“We continue to see strong customer inflow and loyalty, especially in Willys and Hemköp, and we are investing to meet future needs,” said CEO Simone Margulies during her presentation.
Despite positive signals about long-term growth and strategic investments, the market chose to focus on short-term disappointments. The share fell by more than 7 percent during the day, and several investment houses have downgraded their recommendations from "buy" to "hold".
The question going forward is whether Axfood will be able to convince the market that the investments will yield a return, and whether they can maintain growth in an increasingly competitive market?
Sources: Nordnet, Fri Köpenskap, Handelsbanken, Axfood and more.