Food prices continue to rise and inflation was 3.8% at the beginning of the year. This affects us all, and it is clear that many are looking for affordable alternatives when they shop. Axfood (which owns Willys and Hemköp, among others) has managed to get more customers and increased its net sales by a whopping 3.9% compared to the same period last year.
Although sales are going well, things are tougher on the profit side – earnings per share have actually fallen by 19.6% from 2.6 to 2.09 SEK. I think that is really bad, but of course you have your own opinions about it. It is probably a combination of higher costs and investments that are weighing on the result. You can forget about a higher dividend in 2026. The company is distributing 8.75 SEK this year, the profit will probably be between 8-9 SEK this year, so they will not distribute the entire profit, more likely 85% of it.
Willys, Hemköp and Snabbgross are doing strong. Willys continues to be the favorite chain among Swedes and is growing by 3%. Low prices are particularly popular among young people and families with children right now. Hemköp is also doing well with 5.1% growth. Snabbgross 5.2%.
City Gross – a challenge to turn around. City Gross, which Axfood recently acquired, is having a tougher time. Sales fell by 3.8%. The year is intended as a year of transition and Axfood has initiated several changes – including new stores, clearer concepts and better offers. Two City Gross stores are being converted to Willys. The goal is to turn a profit in the second half of 2026.
A major investment in logistics is also underway. Axfood has opened a huge and automated logistics center in Bålsta, which is now in full swing. It handles both stores and e-commerce and is expected to save SEK 200–300 million per year. The next step will be to build a similar center in the Gothenburg area to meet demand in southern Sweden.
In summary: Axfood is growing, especially thanks to Willys and Hemköp. At the same time, they are working to get City Gross in order and make the company more efficient. Despite strong sales, earnings per share have fallen, so there are challenges ahead – but also major investments that may bear fruit later. In the short term, I see Axfood as overvalued.
A reasonable PE ratio is 20, with expected earnings of SEK 8.5 this year and a reduced dividend going forward. Even if it will bear fruit in the future, and let’s say SEK 10 in earnings as early as 2026 or SEK 11 in 2027, it is still a reasonable target price well below today’s. SEK 220 is the maximum I would have paid even if I am a long-term investor. The share is trading at SEK 254.
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