Axfood has lost quite a lot against OMXSPI in recent months and the price reaction that occurred after the latest report did not make matters any better.
The report from Axfood was not really a nightmare to read and I myself was a little surprised that the reaction was as big as it actually was. One theory, it was Willys that delivered a weaker result than expected. Willys is by far the biggest piece of cake in the entire company, so perhaps it is not strange that the market is lowering the share.
What we also know is that ICA (which is no longer listed) lost market share when food prices previously soared. People flocked to Willy’s low prices, among other things. In the last 4 quarters, however, ICA has grown faster than the market and beaten Axfood in the last 3 quarters. Willy’s fine development in 2023 now offers tougher comparative figures.
What is perhaps positive in all this is that it looks most bleak for Coop. Here, everyone else is free to take market share.
In a survey by Consumer Panel Services GFK, they have calculated the loyalty of households to the chains. Here, ICA wins where customers spend an average of 48% of their purchases in an Ica store. For Willys, the figure is 31%. The measurement was from July – September.
Axfood has recently acquired all of City Gross, where the above figure is pure cash. City Gross only reaches 18% of households and on average they make only 12% of their total purchases at City Gross. That number needs to get better. But Axfood has the knowledge and experience to reverse the trend, I would say.
Buying Axfood today is a bet that you can really reverse the boring trend in City Gross, which is even worse than Coop.
Most likely, the stock will not be great to own in the short term. What Axfood is doing now is to keep prices down quite substantially. The margin will thus be worse, but will benefit the store chain in a slightly longer perspective.
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