Axfood AB
STO:AXFO
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Axfood AB
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Hello, and welcome to the Axfood Audiocast Teleconference Q1 2021. [Operator Instructions] Today, I am pleased to present Alexander Bergelund (sic) [ Bergendorf ], Head of Investor Relations. Please go ahead with your meeting.
Thank you, and good morning. This is the Axfood First Quarter 2021 Telephone Conference. And with me today are Klas Balkow, our President and CEO; and Anders Lexmon, our CFO.In the Investors section of our website, you will find the presentation for today's call, which is intended to be viewed in conjunction with our prepared commentary. We encourage you to follow along with that presentation.After our prepared commentary, we will be taking questions. A recording of this call will be made available on the Axfood website. And with that, I will now turn the conference call over to you, Klas. Please go ahead.
Thanks, Alex. And let me also, of course, welcome you to the presentation of Axfood's interim report for the first quarter 2021. And on Page 2 of the presentation, you can see our agenda for today.I will first talk about the recent market developments and then give you a summary of the first quarter's performance for Axfood. Anders will then provide you with an update of our financial position. I will then continue the presentation and talk about our progress with our strategic agenda by highlighting some of our current initiatives. Then we'll conclude the presentation with the outlook for 2021 before we open up for questions.So let's get going and start. So please go to the next page, Page #3. And most of you have probably seen this slide before, but just as a quick reminder about who we are, for those of you who don't follow us on a daily basis. Axfood is a leading food retailer in Sweden with a clear house of brands strategy and a vision to be leading in good and sustainable food.During the 12-month period ending on March 31, sales amounted to almost SEK 54 billion, and we have more than 11,000 employees in the group. And together, we engage with approximately 4.5 million customers every week at more than 300 group-owned stores and online.So let's now go to Page #4. Let me start by just a quick reflection that during the pandemic, it's never been clearer that Axfood, as a large food retailer, has a very important role and responsibility to keep stores, warehouses and transports operating to be able to provide good and sustainable food for everyone.As a business, we have delivered and shown strength by handling an exceptional situation and maintaining product supply. And this should and can be credited to the outstanding engagement that our employees throughout the group have demonstrated to serve our customers during this extraordinary time.In addition to employees in our stores, which have worked hard to keep pace with customers' changed shopping behaviors, employees in our logistics operation have shown exceptional resolve to support. I must say I'm very proud of what we have together achieved.Let's now turn to Page #5 and go through some of the market developments during this quarter. And we are now on Page #6. During the first quarter, demand in the Swedish food retail market remained strong, still impacted by consumers' changed shopping behaviors during the pandemic. However, now we have started to face higher comps, and this quarter compares to the first quarter last year that was impacted by consumers' hoarding of groceries in the early phase of the pandemic.In addition, this quarter had a negative calendar effect of approximately 0.5 percentage points. Last year was, as you all know, Leap Year, and the negative effect from 1 less calendar day was only partly offset by a positive calendar effect from Easter this year. And growth in the online segment was again exceptionally high. While I must also say that demand within food retail in general remained high, the situation continued to be challenging for certain segments of the market, including for certain businesses with exposure to the cafe and restaurant market, cross-border shopping and central city locations.Let's now turn to Page #7. And the chart on this slide shows monthly growth rates year-on-year for the Swedish food retail market, adjusted for inflation and calendar effects. As you can see, growth slowed down considerably in March this year on the back of the high comps from the hoarding last year. And adjusted for inflation and calendar effects, growth in March 2020 was almost 12%, as you know and see, a considerably higher level than in any other month.Let's now go to Page #8. And the chart on this slide shows monthly growth rate year-on-year for the online segment. And online growth has been exceptionally high and exceeded 100% during the 12-month period to March. In the first quarter this year, sales in the online channel accounted for approximately 7% of total food retail sales. And this compares to slightly more than 3% in the first quarter of 2020.Let's now move on to Page #9. And in the online segment of the market, growth is considerably stronger for the Click and Collect option than for home delivery. The growth rate of Click and Collect has, in the past year, been approximately 3x as high as the growth rate of home deliveries. And this trend has clearly continued also during the first quarter this year.In this quarter last year, sales through home deliveries accounted for slightly less than 2/3 of total online sales. But with the strong growth in Click and Collect throughout the past year, Click and Collect is now clearly larger in terms of share of the online segment. As the market growth rate indicates, Click and Collect is very appreciated by our consumers.Let's now continue the presentation and move away from the market update, and please turn to Page #10. And I would now like to walk you through Axfood's performance during the first quarter, so we'll go directly to Page #11. In all, total store sales for Axfood grew 2.4% during the first quarter, a considerably lower growth rate than what we have seen during prior quarters. And as I mentioned before, in addition to a negative calendar effect, this quarter is compared with the quarter first year, a year ago that was dramatically affected by hoarding. Our growth rate in store sales includes also the headwind from Eurocash, which had a negative effect on our store sales growth of more than 2 percentage points.Let's now go to Page #12. Looking then at online, we continue to develop our presence and expand it to more stores and locations. And once again, we outperformed the market. For the first time ever, in an isolated quarter, our online sales to consumers was higher than SEK 1 billion, and our growth amounted to a full 139%. And online growth for the market was also high at 128%.Let's now move to Page #13. And before I walk you through the segments, I would like to comment on the group's overall sales development. Consolidated net sales for Axfood grew by 1% during the first quarter and amounted to SEK 13.2 billion. The negative effect from the hoarding a year ago was approximately minus 4 percentage points. In addition to this was the calendar effect. And also worth commenting that the inflation rate was very low, at 0.6%.We continued to see a good growth for Willys, but that was also offset in large part by a sharp drop in sales for Eurocash of more than 80%. We had weak sales for certain group-owned city center-based Hemköp stores that negatively impacted the Hemköp segment. While sales for Snabbgross decreased as a result of lower demand in the cafe and restaurant market, Snabbgross outperforms of the market is continuing.Please turn now to Page #14. Looking at profit, our group profit and profitability was higher in the first quarter despite considerably lower like-for-like sales versus prior quarters and a significant negative result for Eurocash. With a sharp drop in sales for Eurocash, its operating profit was negative and amounted to minus SEK 52 million. Our group operating profit increased 4% to SEK 565 million, and the operating margin expanded slightly to 4.3%. The increase in profit and profitability for the group comes mainly from good cost control and a higher operating profit for Dagab. But also remember that the gross margin for the group was lower in the prior year period as a result of the unfavorable product mix that arose in connection with the consumers' hoarding of groceries during the initial phase of the pandemic.Let's now move to Page #15. And then looking at the development of each segment, and I would like to start up with Willys. Willys continued to strengthen its position and grow faster than the market, also during the first quarter. But for Eurocash, the situation was as difficult as before in the stalled cross-border trade. Total sales growth for the segment amounted to 3.2% with a like-for-like growth of 0.4%. Operating profit decreased somewhat to SEK 340 million, and the margin was lower at 4.3%. But good like-for-like sales for the Willys stores was offset by the significant negative result for Eurocash and higher staff costs associated with our online sales.Let's now go to Page #16 and the performance of Hemköp. Our total store sales growth amounted to 0.8% and like-for-like growth was 0.5%. While the franchise stores grew faster than the overall market, sales for the group-owned stores were negatively impacted by conversions and a continued weak performance in the city center based stores as a result of low levels of customer traffic during the pandemic.And as a reminder, our group-owned Hemköp stores have higher share of stores at central locations in larger cities than our franchise stores, a majority which are located near residential areas. Also like to comment that the minimarts in the Tempo chain continued their positive development and showed strong growth of 7.8% during the quarter.Looking at profit, the operating profit for Hemköp decreased only slightly and amounted to SEK 59 million. However, the operating margin was a little bit higher at 3.8%. Lower sales were compensated by an improved sales mix and low single-digit one-off gains related to restructuring of the store network.Please now go to Page #17. Now let's turn to Snabbgross. Snabbgross first quarter sales declined by 5.3% in total and 7.9% like-for-like, as the weakness in the restaurant market continued. The market decline was, however, more severe than the sales decline for Snabbgross, at an estimated 29%. So consequently, Snabbgross outperformed the market once again with an increase in its customer base. But due to the negative development in our like-for-like sales, Snabbgross operating profit decreased in the quarter and amounted to SEK 14 million. The operating margin was 1.9%.But I would like to continue a bit with Snabbgross, so please go to Page #18. As -- since its launch, the all-new membership-based store concept, Snabbgross Club, has been well received. Snabbgross Club gives consumers the opportunity to shop for same food product as restaurants and cafes, including groceries, food products, household goods, and gain access to unique and attractive price assortment in bulk packages, along with some personalized special offers.For business customers, the store works like any other Snabbgross, in addition to allowing these customers to join the Membership Club and benefit from the unique offerings. The first Snabbgross Club store in Stockholm that opened up in November last year has attracted more than 6,000 members. And recently, we announced that an additional 2 stores will be opened up in the coming year, one in Södertälje and one in [ Hrubde ]. Let's now go to Page #19 and the operating performance for the Dagab segment. Dagab's first quarter was once again a quarter in which earnings improved considerably, and Dagab continues to deliver improved productivity with exceptionally solid operations. Sales increased by 2.1% as higher sales mainly to Willys were offset partly by lower sales to service trade, Snabbgross and Eurocash. Our operating profit for Dagab increased significantly in the quarter by more than 30% to SEK 217 million. And the operating margin was 1.8%, up from 1.4% in the prior year period. The positive development is explained mainly by increased efficiency. And capacity utilization was high and productivity was improved both for the store and the e-commerce logistics. But in addition, work on increasing the efficiency in our dark store contributed to higher productivity and a more positive performance for Mat.se. But I, of course, also would like to point out that last year's operating profit included higher transport and warehouse costs to meet the high demand in connection with the hoarding, and also certain costs related to the closure of the dark store in Malmö.Let's now move to Page #20. And with that, I would like to hand over to our CFO, Mr. Anders Lexmon, who will present our financial position. Anders, please go ahead.
Thank you, Klas, and then turn to Page 21. Looking at the cash flow for Q1, we continue to show higher operating profit compared to last year, mainly due to high efficiency, like Klas mentioned, in the Dagab operation, and despite continued challenges for Eurocash and Snabbgross. We have a negative deviation of SEK 242 million in net working capital compared to last year. This is mainly explained by the strong net working capital performance in Q1 2020, which was boosted by high account payables, following the high sales rate related to the pandemic. Further, we can see a negative deviation in loans raised compared to Q1 last year. Last year, a drawdown of SEK 200 million was made on our RCF as a precaution to mitigate the uncertainty related to COVID. No loans were raised in this quarter.The AGM decided the total dividend for 2020 to SEK 7.50 per share, an increase of SEK 0.25 per share compared to last year. SEK 3.75 per share was paid out in Q1, the same amount as last year, and the rest will be paid out in September.To summarize, the total cash flow for the period amounts to minus SEK 353 million, a negative deviation of SEK 433 million.Next, Page 22. Total investments for the first quarter amounted to SEK 292 million and was slightly higher than last year. The investments in our retail operations was overall in line with 2020, where new stores were up due to higher pace in acquisitions and establishments, and refurbishments was down due to some lower pace. The investment in our wholesale operation increased with SEK 10 million, mainly due to higher refurbishments in Snabbgross. The investments in our joint operations was up SEK 9 million, mainly due to IT investments in SAP upgrades.Next, Page 23. In the first quarter, we have further decreased our net working capital compared to sales from minus 3.4% to minus 3.6%. We have continued our focus on working capital with improved payment terms on accounts payables. Our SCF program also helps us increase the accounts payable. And at the same time, our inventories and accounts receivables was on stable levels. Next, Page 24. Looking down at the development of net debt, at the end of Q1, we, in fact, had a net receivable position of SEK 782 million, if we exclude IFRS 16, and that's the dark [ shape ] in the chart. The net debt increased as a consequence of the dividend paid in March. The net debt increased despite a positive development of net working capital. The net debt/EBITDA ratio remains at the 1.0 level in spite of the dividend paid out in Q1, thanks to the positive EBITDA development. And the equity ratio was 18.4%, an improvement of 0.7 percentage points compared to Q1 last year.Next page, Page 25. The capital employed increased with approximately SEK 100 million compared to last year Q1 and mainly due to the strong profit. The return on capital employed increased also, that due to a higher running 12-month profit.And to sum up, we can conclude that Axfood will continue to invest in the future and at the same time have a strong cash flow and a solid financial position. And by that, Klas, that's the end of my part. So I hand over to you again.
Thanks, Anders. Now I would like to talk about some of the strategic initiatives that we are focusing on. So if you please turn to Page 27 of the presentation. And we are pursuing a strategy of growth-promoting and efficiency-enhancing priorities to become the market leader in good and sustainable food. And I'm sure many of you have already -- are already familiar with how we work with our 6 strategic focus areas, and you can see them here on this slide.And today, I would like to highlight initiative within some of these areas. So please go to Page #28. And in parallel with our continuous work on improving the day-to-day operational logistics, we are also continuing to work on developing the logistics of the future and product flows. In Bålsta, work is advancing on our new highly automated logistical center. Walls and the ceiling for 70% of the total frame has now been installed. And as a reminder, the logistical center, which is planned to be in full operation in 2023, will be one of the largest and most modern of its kind in Europe for distribution of groceries, both for stores and e-commerce customers.Also, a pilot test of the group's new transport management system is in progress. And during the first quarter, the pilot was expanded to also include, in addition to store deliveries, include online orders. The new system will optimize our transports, create a better overview of transport flows, manage flows to customers and e-commerce consumers, and offer improved order tracking. The system will be implemented gradually and will eventually be integrated with the new logistical center in Bålsta, 2023.We are now on Page 29. And today, we are announcing that we will be moving our fruit and vegetable warehouse from Helsingborg to a new, larger and more efficient warehouse in Landskrona with good opportunities for future expansion and automation. The new warehouse, which is planned to be fully operational at the end of 2022, has a prime location and infrastructure, and will enable a future automation solution. The warehouse will be environmentally certified, and compared with the warehouse space in Helsingborg, its area will be twice as large with more than 37,000 square meters. And in addition, there will be room to grow with a potential expansion area of approximately 8,000 square meters. And this investment should be seen as part of our long-term ambition to build the strongest logistical structure for the future and contribute to improving our customer offer and customer meeting. An efficient, sustainable and dynamic logistical operation with an attractive and efficient assortment is a central part of our work.Let's now turn to Page 30. We're also continuously working on modernizing and upgrading our stores. And currently, the new checkout systems and payment terminals are being rolled out. The new modern point-of-sale solution will lead to lower operating and maintenance cost with long expected useful life. This new solution will streamline the shopping process and support multiple payment methods. The rollout is expected to be completed already by end of this year.Let's now go to Page #31. And I would like to comment, one of our family members within the group is the online pharmacy, Apohem. Apohem is an e-commerce challenger, a full-scale retail pharmacy. In addition to prescription drugs, Apohem offers some 11,000 items. Apohem's growth last year was very strong and amounted to a full 255% compared to the year before. The company's market position improved and progress was made in increasing efficiency in operations. With the new IT platform, improved and optimized website and very high customer re-ratings, Apohem is well positioned to continue now to grow and take the next step.Also, with this move to Axfood expanded dark store in Stockholm, the company will have space for continued growth and potential for synergies with our food retail concept. And as you may have seen recently, we were first in Sweden to launch co-deliveries of groceries and prescription drugs together with Mat.se.Let's now move to Page 32. And our activity in the area of sustainability remains high in all parts of our operations, and I would like to reflect over a few achievements we have made. We are working relentlessly to reduce our carbon footprint, and emissions in our own operations declined by 76% between the base year 2009 to 2020.We have now raised our level of ambition to achieving net zero emissions by 2030. Transports between warehouses and stores are the part of our own operations that have the largest carbon footprint, and the vehicle fleet is therefore being gradually changed over to being entirely fossil-free. To date, approximately 60% of our previous diesel-powered trucks have been replaced with vehicles that can be run on fossil-free fuels. The ambition set for the year-end is that the corresponding share will be 75%.And reducing food waste is another priority area for us. And in 2020, we saw a decrease in all store chains to a record low level. With smart solutions and creativity, including technical tools, clearance sales of products nearing their best-before dates and cooperation with suppliers and charity organizations, we are well on track to achieving our target to cut food waste in half by 2025.We also strive to make it easier for the consumers to make sustainable choices. And one way we do this by offering a broad assortment of products that are produced in a sustainable way and through offerings and campaigns in stores. An important key ratio for us is the share of sales of sustainable label products. And here, too, we see a clear improvement towards our goal of 30% of total sales by 2025.With that, I would like you to turn to Page #33, and let's now turn into the outlook. So please again turn page to #34. And before the outlook, just to comment that we are still in an exceptional time due to the COVID-19 pandemic, and there is still a lot of uncertainty. People continue to consume a lot of food at home. But as I said before, starting from this quarter, the market faces high comps, as we had similar situation a year ago with some variations from quarter-to-quarter.While the food retail market in general benefits from the high demand, there are large variations between segments, and customer traffic with the cross-border trade and in central city location remains at very low levels, as well as the cafe and restaurant market continues to be very weak. In all, we believe these dynamics will persist as long as the pandemic is ongoing.Let's now move to Page #35 and look at our outlook. And our outlook for the year is unchanged. We plan for capital expenditures in the range of SEK 1.8 billion to SEK 1.9 billion. This estimate includes an investment of SEK 585 million in an automation solution for our new logistical center in Bålsta, as well as SEK 115 million investment in land in connection with the facility to secure further expansion possibilities.And in terms of expansion, we plan to establish 5 to 10 new stores, and we also continue the online rollout by adding more stores and locations for our e-commerce to consumers.With that, please turn to Page #36, and I would like to sum up the presentation stating that Axfood delivered, I would say, a solid first quarter with growth despite high comps with higher earnings and improved profitability. The Willys chain and Hemköp franchise stores continue to grow more than the market, and Dagab once again showed impressive productivity. At the same time, we continue to focus on developing our business and have taken large steps in the area of sustainability. Our financial position is strong, and the activity level within the organization is very high, with sights set on the long term.And with that, please turn to Page #37, and I would like to hand over to the operator again to open up the line for questions. Thank you.
[Operator Instructions] The first question is from Fredrik Ivarsson of ABG.
Klas, Anders and Alexander. A few questions from my side. Firstly, I want to talk a little bit about the mix effect that you've seen during this pandemic. Obviously, your gross margin is holding up very impressively. I think it's an all-time high in any Q1, even though last year was impacted by the hoarding, as you said, Klas. But can you talk a little bit about that? And what you expect in terms of mix effect going forward? That's my first question.
Well, the -- we are more -- and I think it's fair to say, if you compared it with last year, as I pointed out, that the hoarding impacted very much our mix and where we saw some more of the low-margin products was selling a lot, and we are more -- at a more normal levels. We also can point out that our private labels continued to make good progress, that is supporting. And I also pointed out food waste program as an example. That is also an area where we are continuing to improve. So there are many small steps. In addition, I would like to comment that I think we mentioned that a few years ago, that we are more data-driven at this stage. We have invested a lot in our systems and analytics. And with that, we can also drive the range and the assortment of the campaigns in a more efficient way and try to drive that forward. Now looking forward, it's difficult to state, but that's more of the key reasons on the healthy levels we are.
That's clear and sounds reassuring. Second question on food price inflation. Is these low levels we see now worrying to you guys? I guess we were down at 0% in Feb. And I guess you said 0.6% for the full quarter. And if we look at the comps in terms of food price inflation, I think it accelerated throughout the summer last year. So if you could talk a little bit about your expectations on the food price inflation, and whether that might be worrying to you guys?
Difficult to forecast, of course. But as we've seen, we currently have seen an effect, obviously, of the strengthening of the currency, some time lag on that, and I think that's what we are looking at. So it depends a bit, obviously, where the currency is moving. And -- but I think we'll be surprised if we don't go back to normal inflation rate over time.
The next question is from Niklas Ekman of Carnegie.
Maybe a follow-up there on inflation, because raw material prices are rising very strongly elsewhere. This is nothing you're seeing to any larger extent in food retail? Is that the case?
Well, not any unnormal levels at this stage. But we are also somewhat difficult to compare. We had the droughts there was at some point in time. And so -- and you still see some inflation in some of the fruit and vegetables. We are also facing, as you know, some challenges with the imports from Asia due to fright and so forth. So -- but that has worked for [ us, we see ] at this stage.
Okay. And another question on Norway. What's -- or the Norwegian border. What's the status at the moment? I assume it's been closed throughout the quarter. Are there -- and that it's still closed. Do you have any indications when this could start to reopen again?
I wish I could say that. But I think we are in close contact with our Norwegian friends and follow this, obviously, closely. We are getting all these clear signals that Norwegians are eager to start to come over to Sweden again to shop. And many of them also have their summer houses here and so forth. So I think the best guess would be that when we see the vaccine is start to help and to sort out and to get the -- the virus to get in control, as I hope and think, that then the borders will open up as soon as we see that effect is coming in. And then -- so when is that? We -- it's a good progress or good. But I mean the progress here, as you see in Sweden, the same is for Norway. So -- but expected not before the summer, is my take out of it at least.
Yes. Yes, that sounds fair. And just in general on the kind of the impact here from the pandemic, what do you see here in terms of online growth? You mentioned here that online has now grown very strongly to 7% of the market. Post pandemic here, do you think there's -- we're going to see a bit of a reversal here? Or are you convinced that this is going to continue to grow from the current base?
I think that's also a good question, and there are several, I think, drivers in this. I think, first of all, which I think, as I pointed out in the report, is that the Click and Collect option is continuing to, call it, outperform the home deliveries in that. Both are growing fast, but click-and-collect option seems to be something that now the consumers in Sweden is in favorable of. Many consumers have now seen the benefits out of that and will continue to shop online. But we also hear a lot of consumers who is eager to come back to the stores. There are a lot of inspiration there, a lot of positive things to be in the stores, and we also continue to have elderly, who's been more or less forced to not be in the stores, so to speak. So -- and as all the reports in the market is also flagging that we continue to have a very strong pandemic wave, so many is trying to -- or they are obviously following the restrictions. So I think you will have a -- many consumers will come back. But also I'm sure that there are consumers who has -- who appreciate the online shopping, will continue to do that as well. And so -- but if the growth rate will be what we are seeing now, maybe most likely slowing down.
Yes, that's fair enough. And finally, a question on Dagab, which obviously has been very strong here in the past couple of quarters in terms of earnings growth. Do you attribute any of this to the strong eat-from-home trend here, suggesting that some of this could be temporary and maybe could reverse as things start to normalize and maybe volumes come down? Or is it -- I mean in the presentation here today, you talked mainly about efficiency. But when things normalize, do you think Dagab could also start to see profits coming down a little bit?
Well, it is efficiency. And now, obviously, Dagab benefits from volume as well. But I think it's clear to say that we've had a kind of dramatic shifts in the volumes, and that has been negatively affected when you don't get the stabilized business. Now we are more on a stable trend. Clearly, the work we've done on our dark stores operations has improved a lot. We are -- even if we are not in the automatic solutions yet, we are still worked on to improve that -- with the tools that we have. So I don't think that it has any major things with the pandemic to do with volume, obviously, but also hard work to continue to drive efficiency and productivity in the system. And again, online has improved significantly during this period.
The next question is from Daniel Schmidt of Danske Bank.
A quick couple of questions from me then. And coming back to the Norwegian border Klas and Anders, and you're right that Eurocash generated a loss of SEK 52 million in the quarter. Could you give us the contribution in Q1 last year from Eurocash to start with?
We don't release that, we release the overall total. But it's that -- I can say as much as that the earnings in the normal year is more related to Q2 and Q3. So it's more like going flat business or 0 business in the soft quarters. And then we have the earnings in the summer period for -- that benefits for the full year. So basically, it was more like a normal -- we lost -- last year, we lost last couple of weeks in March in Eurocash. So the delta is there around 50 versus last year.
Yes. Okay. Okay. Good. And could you shed some light on your work in Hemköp when it comes to you've introduced this sort of ratification program that is a bit unique, I think, when it comes to groceries in Sweden, at least, where you're gratifying purchases of organic food and so on. And I think you started doing it by end of last year. Any reflections on that, sort of the customer response and so on?
Only very positive. We've got some good PR on it because there were some consumers who misunderstood the program and said that you didn't get points on meats and all that, but that obviously you do. So it's just that you're getting extra rewards for shopping sustainable. So positive reactions. Good inflow on new loyal members. So that is on a healthy track. Then Hemköp, we are -- and I think it's worth pointing out. I think, Hemköp is doing a good performance in this quarter, but it should be reflected that we are very much well positioned in some of the larger city locations, which have seen 40%, 50% traffic drop. So obviously, that hurts a lot.
Yes. But it sounded like when you did this by the end of last year, it was -- it is really a way for you to strengthen the profile of Hemköp, which has been a bit lost, I think, over the years and maybe it's still sort of overshadowed by the fact that you're hurting a lot in some locations. But the underlying trend and the underlying response at least has been very positive, if I get you right.
That's absolutely right. And as you can see, so if you look at -- if we exclude some of the worst stores in the worst locations, the Hemköp is doing a good performance, so -- now we have a long-term approach to Hemköp and working also to -- we are refurbishing our stores. We are now rolling out also more Click and Collect solutions to Hemköp stores, et cetera. So it's an ongoing work.
Yes. And then jumping on to the online growth and maybe more the profitability or the lack of profitability. And I think you said last time that -- it sounded at least like you were closing the gap between big losses and maybe breakeven, even though you're making losses. And we continue to see this trend when it comes to Click and Collect, which is better for your economics. Could you give us an update on that?
I think it's more or less the same answer, Daniel. We -- obviously, we are pleased to see that the Click and Collect option is continuing to grow fast and continue to have a high growth, which is, if I look at it, we are getting really close to the gap there with our financials. But then if you see the total customer interaction that we have, these consumers, they shop both online and in-store. And they also tend to shop more as a whole when they shop in omni structure, so looking at customer value is increasing in that perspective. Now still, the overall online with the dark store operation and with the home deliveries and so forth is still -- it's still not a profitable business. But as we are taking good steps in reducing the hurt here, as we have seen in the report partly. So -- but it is a going work. We need to continue now to work with the program that we have in our logistics with the automation parts. That is crucial. But obviously, we are a couple of years away from that.
But if you look ahead, and it's, of course, very hard to say, but with the automation that you have in front of you, that will make picking and packing even more efficient, of course. Do you still need to see a change in consumer behavior when it comes to the generosity of free deliveries in order to get profitability in this business, you think?
I do believe, and I've stated that many times, that we think transparency is important, and we are very transparent with Willys, as you know. And also, in terms of that if you want grocery bags sent to you at home, it is a costly part. And with the low margins that we have in this industry, that needs to be paid in some way in the business model. Now you can take that in price on the products, and you see several players do that. And you will still have consumers who want to pay for that, obviously, who pay a premium for it. But I think also if you compare that to the value trend and the low price trend, that is also a trend that is clear in the market. There will be many consumers who would like to shop where it's most value. And that will be some -- that would most likely be in the stores.So transparency will -- I think, will be coming up in this part.
Yes. Yes. Finally, Klas, the numbers. The lowering of social costs for younger employees. I think you said about SEK 16 million in impact for this quarter. Is that a relevant number for the coming quarters?
Yes, Daniel, I would say it's fair to assume that [ level ].
The next question is from Gustav Hagéus of SEB.
If I can come back to Dagab, which is -- has a remarkable earnings growth year-over-year, and I recognize that the comps are probably favorable. But still, compared to history, margin seems to have stabilized at a much higher level. Could you sort of elaborate a bit on internally what you see the potential here? Are you close to sort of the maximum here in terms of efficiency with all stores aligning? Or is there further potential here? And perhaps connected, talk a little bit about the news today about the new warehouse for vegetables, if that has a material efficiency gains to margins, you think, when all ramp up?
Good questions, Gustav. And I think we are getting back to more normal levels. And we also -- as looking forward, we are, as you know, investing a lot at this stage in efficiency measures. The transport management system will improve and support that. Now talking about the new fruit and vegetable warehouse, clearly, it's a good business case on that as well, where we are expanding the space, which will gives opportunity for us to -- we are -- it's already now -- we are in a tight warehouse today. So -- and when you are too tight, you're not getting the efficiency gains you want to have. So that will open up. And as I pointed out as well, it gives opportunities for us, for also further go into automation in parts of that area. It will not be anything near Bålsta. But in parts of it, that will also support further efficiency gains when we come to that [ fact ].
Okay. Sort of a tricky question. But minorities, there's quite of a step change in the past 2 quarters. Just wondering sort of what the dynamics behind this? And do you think it's prudent to extrapolate sort of the SEK 30 million per quarter that has been recently rather than the SEK 30 million per year, which has been prior to those 2 quarters or -- that would be helpful.
No. Gustav, the only market we have is for Eurocash. The difference there is only connected to Eurocash.
Okay. All right. And finally on online, coming back to that. You mentioned Click and Collect is more profitable and growing more. But if we isolate inner city Stockholm plus inner city Gothenburg, we see the same trend there, which is more home delivery doing there, i.e. is the growth in Click and Collect more of a function of you rolling out online more in smaller cities?
Well, on the spot here, I have not looked at it recently. But obviously, Click and Collect is more growing outside where you have as well for us. We have Mat.se in Stockholm and Gothenburg, and there are also other players that only there focus on. So there are different competition there as well. And outside, there is more Click and Collect driver. But I can also see if you look at the operations that we have in -- that's as example, Stockholm, we have -- and as well as Gothenburg, it's a full speed on Click and Collect as well for the consumers in these 2 larger cities. But I cannot answer on the spot here exact the differences.
The next question is from Magnus Raman of Kepler Cheuvreux.
Perhaps I can start with tying in on Gustav's last question there. In terms of -- you have stated a couple of times here that market data suggests that customers prefer Click and Collect. But did you make any survey among your customers and -- to find out if the reason behind this difference in growth is driven by perhaps lack of delivery alternatives outside major cities, as mentioned here, or perhaps delivery slots in the cities, if it's driven by the customer's perception of the delivery charge for home delivery? Or if it is, in fact, that consumers altogether find Click and Collect to be more convenient? That's my first question.
No. We absolutely have done that and consumers confirm that the Click and Collect option is something that they appreciate, because then they can be more flexible on picking up the goods. But also, for sure, it's a price -- it's a value game as well for the consumers in terms of how they look at it. One should remember that grocery costs for an average family is a -- it's a high cash outlay, and it's an important part of their economics. So on a frequent basis, obviously, there are a lot of gains here to reduce that cost. So it is really appreciated from a cost perspective, and also from a convenience perspective.
Right. That's great. That's really clear. Then on Eurocash. I mean assuming -- you elaborated a little bit about last year's Eurocash profits and taking those sort of suggested numbers into calculation, suggest that group operating profit growth would perhaps have been a full 13% to 14% year-on-year instead of the 4% you report now. So it's definitely a material question here, but -- and I know you strongly believe in recovering border trade post the pandemic, you even opened a new store here as well. But do you -- could you at least share your view if you expect any change driven by lowered excise duties, the scrapped sugar tax and so on, and eagerness to shop from Norwegian customers?
Well, we have -- as you yourself point out, we are confident with the border shop. And obviously, there are many areas that also can influence. Historically, it's also been currency rates. But one should remember, it's not that long ago that some of the taxes were increased in Norway. And even before that, we had a very good business in the cross-border trade. So even if, in some areas, some of these taxes are planned to be reduced, if you look at it, price point difference is still very, very attractive to come to Sweden to shop. And I think maybe also want to add is not only that, it's also a shopping experience as well, that many Norwegians are appreciate to come to Sweden for the experience of shopping here.
Shopping in our beautiful stores in our beautiful township, yes. Right. So...
Exactly. And there's a lot Yes, it's true. And obviously, particularly right now, if you look at the West Coast, there are many Norwegians who is eager to come to their summer houses, et cetera, so.
Yes. Yes. Sure. Then you mentioned the construction of the Balsta facility continues on track. But did you alter any plans in terms of the capacity split, online versus store, by following the strong uptake we see now in penetration?
We have already in that plan to have that capacity. And as I said, when we have construction this, we have a very large flexibility within the system. So -- and obviously, we follow this. And then it's more about how many lanes we should build up from the online, but the structure in terms of the automation is there.
So it comes later, I guess. That decision?
No. I think we are well on track. But I mean -- but obviously, we are following it closely, and that's partly what we can do is to -- if we continue to see massive growth on online, we can just add fewer lanes to the picking stations. So...
Yes, that's what I meant. You don't choose the lanes now. You can...
No, no, you're right. Right. Yes. Exactly.
And also, I just wanted to ask if you could share which company you collaborate with building this new transport management system that you mentioned?
[ The Skanska ].
Okay. And then a final one for me. This new food and vegetable warehouse in Landskrona. Could you perhaps elaborate on the total investment here and the split of years? Is there any material effect on 2022 CapEx, do you believe?
Well, at this stage, it's a rental that we are building this -- or a rental agreement. So there are -- since it's -- in this announcement, it's a manual warehouse. If we go into automation, we'll come back to that part of the investment. But again, it's more of a parts of the operation that will be optimized. But at this stage, it's rental.
The next question is from Nicklas Skogman of Handelsbanken.
I would like to return to the discussion about transparency and charging properly for online. So based on my estimates, your online share is higher than your overall market share, and you continue to grow faster than the market online. But you're still losing money online. So one could argue that it is up to you, Axfood, who are -- that you are in the best position in making the first move in trying to make the online market more rational, if you will, in terms of pricing...
No, I think you're right in a way. But I also must say look at Willys and look at any others, we have started already from the beginning to be transparent. We have a clear fee structure for both Click and Collect and home deliveries. So we're already there.
Well, if you're still losing money, you're not really there yet, but...
Well, as I said, we are getting better and better, particularly on the Click and Collect solutions. But obviously, it is a market that is competitive out there as well, and we need to be in balance with that as well.
As there are no further questions, I hand back to the speakers.
So with that, then I thank you all for a good Q&A session, and thanks for listening, and I wish you a good day. Thanks a lot. Thank you.
Thank you.