Logistics Automation And Eco Initiatives Will Secure Swedish Retail Strength

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AnalystConsensusTarget
Consensus Narrative from 4 Analysts
Published
06 Jul 25
Updated
24 Jul 25
AnalystConsensusTarget's Fair Value
SEK 276.25
5.7% overvalued intrinsic discount
24 Jul
SEK 292.00
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1.0%

Author's Valuation

SEK 276.3

5.7% overvalued intrinsic discount

AnalystConsensusTarget Fair Value

Key Takeaways

  • Ongoing automation, logistics investments, and store expansion are set to boost efficiency, margin improvement, and long-term earnings growth for Axfood.
  • Strategic focus on omnichannel growth, sustainable offerings, and hypermarket entry strengthens market positioning, brand loyalty, and future revenue potential.
  • Intensifying competition, integration risks, high capital spending, market concentration, and sustainability demands threaten Axfood's margins, profitability, and ability to maintain earnings growth.

Catalysts

About Axfood
    Engages in the food retail and wholesale businesses primarily in Sweden.
What are the underlying business or industry changes driving this perspective?
  • The company's ongoing investments in supply chain automation and logistics (e.g., the fully operational Bålsta robotic warehouse and planned capacity expansion in southern Sweden by 2030) are expected to continue driving operating cost reductions and margin improvements, with efficiency gains gradually increasing towards the upper end of targeted savings-positively impacting net margins and long-term earnings growth.
  • Axfood's resilient outperformance in both brick-and-mortar and online channels-demonstrated by robust volume and customer traffic growth at value-focused banners (Willys, Hemköp, Snabbgross) and double-digit e-commerce expansion above market rates-positions the company to capitalize on growing population density, urbanization, and the structural shift toward omnichannel grocery shopping, directly supporting future revenue growth.
  • The expansion of eco-friendly initiatives (such as the opening of Sweden's largest solar park and rapid reduction of fossil-based transport emissions) and the broadening of the sustainable product assortment strongly align with the evolving consumer demand for sustainable and healthy offerings; this can enhance brand loyalty, pricing power, and customer retention, supporting topline and gross margin improvement over time.
  • The acquisition and turnaround strategy for City Gross (an entry into the attractive hypermarket segment) is on track to deliver profitability by the second half of 2026 via store concept upgrades, cost controls, and brand revitalization-representing a forward-looking revenue and earnings catalyst as the integration matures.
  • Streamlined organization (removal of 100 positions, ~SEK 80M annual cost savings from 2026) and increased store openings, especially in high-growth discount formats, are expected to reinforce scale advantages and operational leverage, providing further tailwinds to operating profit and long-term margin expansion.

Axfood Earnings and Revenue Growth

Axfood Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Axfood's revenue will grow by 4.3% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 2.4% today to 3.6% in 3 years time.
  • Analysts expect earnings to reach SEK 3.5 billion (and earnings per share of SEK 14.63) by about July 2028, up from SEK 2.1 billion today.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.8x on those 2028 earnings, down from 29.7x today. This future PE is lower than the current PE for the GB Consumer Retailing industry at 38.6x.
  • Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 5.28%, as per the Simply Wall St company report.

Axfood Future Earnings Per Share Growth

Axfood Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Intensifying price competition in the Swedish grocery market is forcing Axfood to make continuous price and marketing investments, leading to lower gross margins in key segments (e.g., Dagab and City Gross); if this persists, it may continue to erode net margins and reduce earnings growth over time.
  • The integration and turnaround of City Gross presents ongoing operational and financial risks, as the segment is not expected to reach profitability until the second half of 2026; prolonged underperformance or delays in achieving break-even could drag on group-level revenues and earnings.
  • Axfood's recent large-scale investments in logistics automation and expansion (e.g., Bålsta fulfillment center, further planned capacity in southern Sweden) increase capital employed and financial leverage; if volume growth or operational efficiencies fall short, returns on these investments could be inadequate and negatively impact long-term return on capital and overall profitability.
  • The company's concentration in the Swedish market leaves it vulnerable to domestic economic shocks, regulatory changes, or demographic shifts (such as aging populations or changing shopping behaviors), which could dampen revenue growth and earnings momentum relative to more geographically diversified peers.
  • Long-term sustainability and environmental demands, such as maintaining renewable energy initiatives and adapting logistics and transport to stricter regulations, may require significant ongoing capital and operating expenditures, potentially pressuring net margins if Axfood struggles to pass these costs on to customers.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of SEK276.25 for Axfood based on their expectations of its future earnings growth, profit margins and other risk factors.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK98.4 billion, earnings will come to SEK3.5 billion, and it would be trading on a PE ratio of 19.8x, assuming you use a discount rate of 5.3%.
  • Given the current share price of SEK291.5, the analyst price target of SEK276.25 is 5.5% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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