Axfood AB
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Axfood AB
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Hello and welcome to the Axfood Webcast for Teleconference Q2 2021. [Operator Instructions]Today, I'm pleased to present Alexander Bergendorf, Head of Investor Relations. Please go ahead with your meeting.
Thank you and good morning. This is the Axfood Second 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. And 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.
Thank you, Alex. And of course, good morning, everyone, and let me also welcome you to today's call. But let's now start on Page #2 of the presentation. Here, you'll see the agenda for today. So first, I would like to provide you with a market update and then a summary of our second quarter's performance for Axfood. Anders will then go through our financials position. And after his part, I will continue then to talk about our strategy by highlighting some of our current initiatives. Also here, give you an update on our proposed Bergendahls transaction. And also we have, as you may have seen, announced some exciting news this morning with regards to our logistical platform that I will go through in more detail. The last part of the presentation is about the outlook for 2021. And after that, we'll open up for questions.So let's get started, and please go to the next page, Page #3. As usual, before we deeper into the quarter, just a quick reminder about who we are for those of you who don't follow us on a daily basis. We are a leading food retailer in Sweden with a clear house of brand strategy and a vision to be leading in good and sustainable food.During the 12-month period ending June 30, sales amounted to slightly more than SEK 54 billion, and we have more than 11,000 employees in the group. Together, we engage with approximately 4.5 million customers every week at more than 300 group-owned stores and in online.Let's now turn to Page #4, and I would now like to go through the market development during the second quarter. So please turn another page and go to Page #5.During the second quarter, demand in the Swedish food retail market continued to be strong and was still impacted by the effects from the pandemic, including the changed shopping behaviors among consumers. However, as seen in the first quarter this year, the market continued to face high comps. Consumption during the second quarter last year was strong and significantly impacted by the changed shopping behaviors that I just talked about. In addition, the calendar effect this quarter was negative at minus 1% mainly due to the negative Easter effect. And lastly, this quarter, we had a negative food price inflation amounting to minus 0.6%, which, of course, has had a negative impact on the overall growth.Growth in the online segment was strong, but the rate of growth is significantly lower in the prior quarters due to high comps in the prior year and also consumers now also returning more to our stores. While 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 central city locations, cross-border shopping and in the service trade. However, in the latter part of the quarter, we saw some encouraging developments, which mainly correlates with the overall better situation around the pandemic in Sweden, i.e., the current low spread of the infection and ongoing vaccination rollout. As an example, in the cross-border trade, the situation started to improve from mid-June with the eased travel restriction imposed by the Norwegian authorities.The restaurant market faced easy comps during this quarter as the second quarter development last year was very weak in the early phase of the pandemic. And although the market grew year-on-year, it's worth noting that consumption levels are still significantly lower than before the pandemic.So let's now go into some more details. So please turn to Page #6 in the presentation. As I mentioned, this quarter had a negative development for food prices, especially then in May. And according to data from Statistics Sweden, you have to go back to early 2006 to find a higher year-on-year decline. Part of the decline was due to the strengthening of the SEK versus the euro, but we also had a price increase in certain categories last year that were due to supply chain disruptions during the initial phase of the pandemic. But important to note going forward is that food price comps are lower in the second half of this year, so eventually, we expect inflation to come back.Let's now turn to Page 7, and let's look into the monthly growth rates year-on-year for the Swedish food retail market. As you can see on the slide, growth has slowed down considerably this year on the back of high comps. Note that the chart on the slide shows total growth, so you see some quarterly fluctuations due to, for example, calendar effects and inflation.And if you then turn to next page, Page #8. And here, you'll find the chart on the left side of this slide shows market growth rates adjusted for price and calendar effects. So growth has eventually come down from levels seen in 2020. Over the last 3 months, adjusting for price and calendar, growth has been pretty stable at around 2% to 3%.However, I would also like to add that in general, the market is resilient. And as said before, consumption levels compared to the situation before the pandemic remained high, which is evidenced by the data in the chart on the right of the slide, which shows the market value for food retail market every year going back to 2011. During this period, the compounded annual growth rate amounted to approximately 3%.If we then go to Page #9 and growth within the online segment. As with the overall market growth, growth in the online channel has come down quite in the last couple of months mainly due to high comps. While the interest among consumers to shop grocery online is still high, we see that some people are increasing their purchases in stores, which mostly is -- most likely is due to the improved situation around the pandemic. As an example, for Willys e-commerce, the share of consumers aged 65 and above has, in the recent months, been lowest since October last year, a clear change of trend in that segment.In the second quarter this year, sales in the online channel accounted for approximately 6% of total food retail sales. While this year compares to slightly more than 5% in the second quarter of 2020, it is actually lower compared to the first quarter this year when sales from the online channel accounted for approximately 7% of total food retail sales. In the online segment of the market, growth continued to be considerably stronger for the Click & Collect option versus the home delivery.Moving then to the next page, and we are now on Page #10. And with that, let's just turn to the second quarter development for Axfood. So please go to Page #11.Total store sales for Axfood grew 1.1% during the second quarter, which is higher than the market growth of 0.6%. However, obviously, both these growth rates are significantly lower than before, impacted by high comps, negative calendar effect and food price deflation.Let's now go to Page #12. We continue to expand our presence online and add more stores and locations. We also continue to outperform the market. And in the second quarter, online sales to consumers once again exceeded SEK 1 billion. While our growth amounted to 36%, online growth in the market was 27%.Let's now move to Page #13 and get into our key ratios. Consolidated net sales for Axfood grew by 2.5% during the second quarter and amounted to SEK 13.9 billion. Comps were high from the prior year and negatively impacted then again by the calendar and food price deflation. Willys and Hemköp grew more than the market. And Groupon's Hemköp stores grew at a lower rate than the market, which is explained by conversions of stores to franchise as Hemköp like-for-like outperformed the market overall growth. Sales for Snabbgross increased significantly owing to low comps and a somewhat improved situation in the cafe and restaurant market.Please now turn to Page #14. As we have some large investments and initiatives in the year to come such as, for an example, a new logistics center in Bålsta and the Bergendahls transaction, we will start to see noncomparable financial impact. Therefore, as of this quarter, items affecting comparability will be reported separately. This refers to the financial effects in the combination with major acquisitions and divestments or other major structural changes. And these items are reported separately to facilitate understanding of the group's overall financial performance when comparing different periods.So during the second quarter, our operating profit includes items affecting comparability and more specifically, acquisitions cost of SEK 54 million associated with the Bergendahls transaction. As a reminder, we expect to incur total integration and transaction costs of approximately SEK 200 million during the period to 2023.Then into the ratios. In total, group operating profit amounted to SEK 607 million, and the operating margin was 4.4%. Operating profit, excluding items affecting comparability, amounted to SEK 661 million and the corresponding margin was 4.8%. The higher operating profit, excluding items affecting comparability, is mainly attributable to the higher operating profit for Dagab, Snabbgross and Hemköp. The lower operating profit for Willys is mainly attributed to negative like-for-like sales growth owing to very high comps and the negative results for Eurocash.We then talk about Willys. Let's go now to Page 15 and get into the Willys segment. Volume growth for Willys was high in the quarter, but the rate of sales growth was lower due to the negative calendar effect and food price deflation. Willys had very high comps in the quarter. And if you look back at the prior year goals for the larger format Willys stores, i.e., growth in the second quarter 2020 compared to the second quarter 2019, it amounted to a full 15%, so high comps. But during the second quarter this year, growth for these stores amounted to 1.2% this year. So lastly, we are still growing but from high levels.Lastly, the development for food price has been negative. It is worth noting that we, as other businesses, face upward pressure in terms of wages and salaries.Eurocash experienced a very challenging period throughout most of the second quarter, and sales were only up 5% from an exceptionally low base. However, the situation improved from mid-June as customer traffic started to gradually increase with -- in combination with the eased travel restrictions.In all, total sales growth for the segment amounted to 0.9%, slightly above the market, and like-for-like growth was minus 1.1%. Operating profit decreased to SEK 372 million, and the margin was lower at 4.6%. The lower operating profit is mainly attributable to the negative like-for-like sales growth and also then the negative results for Eurocash.And some comments about Eurocash and the cross-border trading, so let's move to Page 16. We -- within Eurocash, we recently commissioned YouGov to survey Norwegian consumers about their views and intentions to shop in the cross-border trade after the pandemic. And according to the survey, which was carried out in June, the share of Norwegians with an intention to shop in Swedish stores along the border after the pandemic is still very high and essentially similar to the corresponding level before the pandemic. While the Norwegian consumers, first and foremost, appreciate the low prices in the cross-border trade, they also appreciate the trip itself over to Sweden as well as the Swedish stores' wider and more varied assortment, including new and exciting products. Lastly, the ease of shopping is another reason to why Norwegians cross the border to go to shop in Sweden.These results are, of course, very encouraging. But in this difficult time during the pandemic, we have kept our sight on the long-term positioning for Eurocash and focused on improving Eurocash stores and concept, educating employees and maintain very good stores to welcome Norwegian consumers with an even better customer offering once they come back.Let's now move from Willys segment over to Hemköp. So we are now on Page #17 and the performance for the Hemköp segment. Total store sales growth amounted to 1.5%, and like-for-like growth was 1.1%. While the franchise stores grew faster than the overall market, sales for the group-owned stores were negatively impacted by conversions. The like-for-like growth for the group-owned stores was however solid at 1.9%. The Tempo chain continued its positive development and posted good growth during the quarter despite high comps.Looking then at the operating profit for Hemköp, increased and amounted to SEK 62 million, and the operating margin was higher at 4%. The increase is mainly attributed to positive like-for-like store growth and improved sales mix and good cost control.Please now turn to Page #18 and turning then to Snabbgross. The second quarter sales increased strongly by 13.1% in total and 10.9% like-for-like. The comps then in the prior year were low as a result of the weak market development during the initial phase of the pandemic. And consequently, the market development was positive this quarter.However, the SEK 971 million in sales for Snabbgross was actually higher than its sales for the second quarter in 2019, i.e., before the pandemic. So in other words, record sales for Snabbgross, an impressive achievement considering that we are still in part of the pandemic period.Snabbgross continued to increase its customer base, and a higher average ticket value also contributed to the increase in net sales. And with the positive development in like-for-like sales, Snabbgross' operating profit increased significantly in the quarter and amounted to SEK 57 million. The operating margin came in at 5.8%.Please turn to the next page, and we're now on Page #19 and the operating performance for the Dagab segment. Dagab's second quarter was once again a quarter in which earnings improved considerably, and Dagab continued to deliver very high productivity with truly solid operations.Sales increased by 2.8% driven by higher sales to Hemköp, Snabbgross and also service trade. The operating profit increased significantly in the quarter by approximately 25% to SEK 235 million. The operating margin was 1.9%, up from 1.6% in the prior year period. The increase comes mainly from high capacity utilization and improved productivity for both stores and e-commerce logistics. But please note that we, in the second quarter last year, had costs in transports and warehouse to meet the high demand that arose in the connection with the initial phase of the pandemic. Work on improving efficiency in the joint group dark stores continued to higher efficiency and more positive development reflected in Mat.se's performance.Moving on 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 we are on Page 21. Let me first sum up net sales and operating profit for the first half year. Net sales for the group increased with 1.8% to SEK 27.1 billion. Store sales for the Axfood Group increased by 1.7% and was in line with the overall market growth for the period. The operating profit, excluding items affecting comparability of SEK 54 million, increased with SEK 78 million or 6.7%. The operating margin increased from 4.3% to 4.5%. Items affecting comparability consist of costs relating to the ongoing acquisition of Bergendahls Food and was recognized in the second quarter.Let's then go to Page 22. Looking at the cash flow for the first half year, we continued to show higher operating profit compared to last year mainly due to high efficiency and a strong result in Dagab but also in Snabbgross due to a strong second quarter. We have a positive working capital effect of SEK 161 million, slightly below the positive effect of SEK 192 million in the first half year 2020. There were no calendar effect in the period. Further, we can see some higher investment activity in the first 6 months compared to last year. The deviation is mainly related to investments in the retail operation and in IT. To summarize, the total cash flow for the period amounted to SEK 10 million, a negative deviation of SEK 75 million compared to last year.Then let's go to Page 23. Total investments for the first half year amounted to SEK 596 million. The investments in our retail operation was up SEK 37 million mainly due to Eurocash acquisition of the store in [indiscernible]. But the pace of refurbishments -- both the pace of refurbishment and new establishments were in line with last year.The investments in our wholesale operation increased with SEK 90 million explained by some higher investments in both Snabbgross and in our logistics operation in Dagab. The investments in our IT operation was up SEK 36 million mainly due to investments in new cash registers and payment terminals in our stores.Let's then move to Page 24. In the first 6 months, we have further decreased our net working capital compared to sales from minus 3.4% to minus 3.7%. We continue our focus on working capital with improved payment terms on accounts payable. Our FCF program also helps us increase the accounts payable.Let's then go to Page 25. Looking at the development of net debt at the end of June, we had a net receivable position of SEK 1.156 billion, excluding IFRS 16, and that's the dark staple in the chart. The net debt decreased during the second quarter as a consequence of the positive working capital development and the strong operating cash flow. The net debt-to-EBITDA ratio remained stable at the 1.0 level. And the equity ratio was 19.9%, an improvement on 0.4 percentage points compared to June last year.And then let's go to Page 26. The capital employed decreased with approximately SEK 350 million for the first half year. Return on capital employed continued to be on a very stable level between 25% and 26% and correspond to approximately 40% if we exclude IFRS 16. And to sum up, we can conclude that Axfood 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, I'm fine with my presentation, and I hand over to you again.
Thank you, Anders, and I would now like to give you an update with regards to our strategic agenda. So please now turn to Page #28. And let me first just give an update on the status for the Bergendahls transaction.On May 31, we announced our agreement with Bergendahls to acquire 100% of Bergendahls Food. In addition, as part of the strategic partnership, we will acquire a minority stake corresponding to 9.9% of the shares in City Gross with an option to increase our total shareholding to 30%.This is a compelling deal with a clear industrial logic. Axfood and Bergendahls are 2 well-managed and family-founded companies governed by values with a long-term perspective in both business and how we see our role in the society. We want to make a difference for the consumers and be a positive force.The transaction will result in economies of scale, cost synergies and increased competitiveness. Through increased efficiency as well as product range and logistics improvements, the transaction will also benefit wholesale customers and Swedish consumers. The partnership with Axfood will strengthen City Gross' competitiveness and create conditions for further development of the concept and higher market share in the hypermarket segment. The partnership will also give Axfood exposure to the hypermarket segment of the Swedish food retail market and increase our presence and reach.Now completion of the transaction is subject to approval by the Swedish Competition Authority. And the review, which can take up to 4 months, is ongoing. According to our agreement with Bergendahls, closing can take place no earlier than September 1 this year.Let's now move to Page #29 in the presentation. And as a quick reminder, we are pursuing a strategy of growth, promoting and efficiency-enhancing priorities to become the market leader in good and sustainable food. I'm sure many of you are already familiar with how we work with our 6 strategic focus areas, and you can see them on this slide. And today, I would like to highlight initiatives within our supply chain and most notably, the initiatives and investments that we announced this morning.So please go to Page #30. And let me just start that work on our new highly automated logistics center in Bålsta outside Stockholm is proceeding on schedule. Recently, the first trucks loaded with automation equipment have rolled in and unloaded. And we are now entering the next phase in which we begin work on installing the automation in the dry goods warehouse section. The logistics center is planned to be fully operational in 2023, and we'll be one of the largest and most modern facilities in Europe for distribution of groceries to store as well as directly to e-commerce customers.Let's now turn page and we are now on Page 31. And as I mentioned in the beginning of the presentation, we share with you some exciting news this morning about several new investments in our supply chain. As to develop an even more sustainable, efficient and competitive product supply, we are now taking the next step and solidifying the base for a top class nationwide logistical platform. Today, we unveiled new exciting initiatives entailing that in the coming years, we will be moving and automating our e-commerce warehouse in Backa, Gothenburg, expanding and automating our high-bay warehouse in Backa and automating our new fruit and vegetable warehouse in Landskrona. These investments will be -- complement our new and highly automated logistics center in Bålsta by covering the southern parts of Sweden and will create further conditions for growth and profitability for many years to come.Please turn to Page 32, and let's dig a little bit deeper into these initiatives. First, in Gothenburg, we are planning to build an all-new, highly automated e-commerce warehouse adjacent to the distribution center in Backa where Dagab today owns the neighborhood property. An agreement has been signed with Witron, who already provides us with the automation for the Bålsta facility to deliver the automation solution. In total, the new warehouse will have 5x higher capacity than the current dark stores that we are operating south of Gothenburg.The new warehouse is expected to be completed by year-end 2024 and will be fully operational during spring 2025. Until then, the group's existing dark store in Västra Frölunda will continue to be developed. This new warehouse will dramatically increase capacity as well as efficiency compared with existing warehouse where picking is done manually. The total investment with Witron will amount to SEK 48 million during the period 2021 to 2024.Let's now move to Slide 33. And second, to add additional pallet space and meet future volume growth in Southern Sweden, Dagab's existing high-bay warehouse at Backa distribution center will be strengthened and expanded with new automated aisles. This will increase the total capacity by approximately 30% and thereby ensure that the warehouse will be able to meet future growth. Our existing agreement with the automation and logistical company Daifuku is being extended, and the investment in automation amounts to approximately EUR 3 million.Let's turn page and go to Slide 34 and go through the third initiative that we are communicating today. When we released our interim report for the first quarter this year, we also announced that to develop and streamline the logistical operation and accommodate future volume growth, had signed a 15-year lease for a new larger nationwide warehouse for fruit and vegetables in Landskrona. The new warehouse, which is planned to be fully operational at the end of 2022, has a prime location and infrastructure and will replace the existing warehouse in Helsingborg.Today, though, we have announced that an agreement has been signed with the automation provider KNAPP to automate parts of the warehouse. This new automation will -- which is planned to be fully operational in 2024 significantly increases our capacity and efficiency and also provides us with more flexibility. The total investment in automation will amount to SEK 14 million during the period 2021 to 2024. And as a reminder, KNAPP is already an existing provider for automation for us through the automation solution that is currently in use at the perishables warehouse in Jönköping.Let's now go to next page, #35. And before we go into the outlook, I just want to highlight that we are also taking steps with sustainability, and we've taken other steps in the collaboration with Scania investment in Scania's first series manufactured and delivered fully electrical heavy truck in Sweden and an all-new plug-in hybrid truck, which are making daily deliveries of groceries to stores in greater Stockholm area.Dagab is one of the first actors in Europe to put electrical trucks into operation in this way, representing a major step in our journey to fossil-free transports. Overall, as you may know, trucks can be driven on alternative to fossil fuels, now in our case, accounts for roughly 2/3 of Dagab's delivery fleet.With that, move to Page 36, and let's go into the outlook. So please then again turn page to Page #37.We are still in an exceptional time due to the coronavirus pandemic. And while the overall situation in the society has improved, there is still a lot of uncertainty. Although the food retail market in general benefits from the high demand as people continue to consume a lot of food at home, there are still large variations between segments. However, it should be noted that the situation for the worst affected segment has become better, for example, in the cross-border trade.During the back half of this year, the market continues to face high comps. Eventually, we anticipate food price inflation to come back. However, for the full year, we have a lower level of food price inflation than in 2020.Let's now move to the next page, Page 38. And this year, 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 the 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. 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.While our outlook for the year is unchanged, we anticipate that we will be in the upper range of the guidance for both capital expenditures and store establishments.Please now turn to next page, Page #39. So with that, I would like to sum up the presentation and can happily note that we have closed yet another strong quarter, actually, another all-time high. We are emerging from the first half of 2021, which was characterized by the pandemic and changes in the market, stronger and more competitive than before. Our employees have worked really hard and with great energy during these very special circumstances, which is something that I'm really proud of and grateful for. Our financial position is strong, and we continue to maintain a high tempo, not the least in our future investments to ensure our competitiveness also for the longer term.Please turn to next page. As a final remark, I would like to encourage you to save the date for Axfood's Capital Markets Day 2021, which will be held on December 16 this year. At this event, we will cover many other areas that are of importance for the group to continue to drive profitable growth. More details around the event will follow in due time.But with that, please turn to Page 41, and I hand over to the operator to open up the line for questions. Thank you.
[Operator Instructions] Our first question comes from the line of Fredrik Ivarsson from ABG.
A few questions from my side. First, if we can start with Willys. I think like-for-like was minus 1.1%. The market grew 0.6%. I guess that's almost a 2% deviation. And you mentioned tough comps as an explanation for that. But would you say that there's any other?
Can I start with -- yes, can I start to comment on that? Because, obviously, the market growth is 0.6%. Willys grew 0.9%. So Willys outperformed or grew faster than the market. Just to make it clear that when you're comparing market growth, that is not market for like-for-like market, that is total market. So that's the right comparison. So just to state that. So you cannot take the like-for-like as a comparison.Now then I think it's worth noting, if you look at the rest of the market last year, Willys -- large Willys had a 15% growth. So of course, we are, I think fair to say, meeting extremely high comps. And I think with that in mind, still increasing with 0.9% is not that bad. So it is -- I mean there are still -- we continue to strengthen Willys. We continue to see the increase of more loyal consumers. Our Click & Collect solutions goes really well. So I see nothing else more than in this report that we are meeting high comps.
Okay. Right. Yes, no, I'm fully aware that it's not a complete apple-to-apple comparison. But still, if looking at the history, the deviation, if comparing like-for-like versus market growth, has been quite astonishing in Willys and now it wasn't. So just curious to hear whether there could be any other things like consumer patterns or weather.
No. Okay. So fair enough. But it is -- I think that if we just, just for an example, look at growth for Willys since 2019, it's very strong.
Yes. No, definitely. And also when looking into the second half of the year, comps are basically up also.
Yes. It is tough comps. So yes.
Yes. Okay. And then on Eurocash, you mentioned that the situation started to improve in June. Can you say anything about where you were versus 2019 figures during the end of Q2? Or maybe...
No, I think if -- when we -- as we also reported, we grew 5%, which is obviously from an extremely low, low, low levels. So it is not really -- I mean it's on the low side because in the end of June, it started to open up.But what I can say that after the -- on early July, we saw some ease in the restrictions. Still, it is a bit still of a hassle for -- to cross the border, but it's significantly better. I think you've seen in the media and it's very public that we now start to see customers in our stores. It is really encouraging and drives a lot of energy for particularly our employees that we can now start to meet customers again. There are very happy customer there as well. But it's still not fully speed because it's still some -- it's not that easy to cross the trade and not all areas are opened up.So -- but it is encouraging start in July. And we hope now the restrictions will ease even further and we'll get back to full speed. But it's encouraging in the beginning of July.
Great. And the last one for me, on CapEx. Can you say anything about the timing of the investments into the new e-com warehouse in Gothenburg?
Yes. We'll have to come back with that. We will have some signing costs, obviously, but that's what we guided. We will be within the current range. Now the majority of the investments for that will be linked into 2023 and 2024 for the e-commerce part. So -- but more details on that. We'll have to come back with that.
The next question comes from the line of Daniel Schmidt from Danske Bank.
Just a follow-up, Klas, on the Eurocash discussion. Because you have given us sort of the impact in terms of losses quarter-by-quarter when it comes to the pandemic and Eurocash. Are you willing to do that now for Q2?
The losses are more or less the same as -- they are slightly higher in this quarter versus quarter 2 last year, which is more reflecting to that we have one more stores now in operation. We -- you may recall, we acquired [indiscernible]. So we have an additional store. So that is on a small -- it's not a major -- but slightly worse, if I may say so.So we are more or less equal on that. Obviously, we hope now with getting some volume back, that will start to ease. But of course, it has impacted us significantly last year. And we hope now that we now start to see a turning point. Again, July looks encouraging, but I am humble to make any forecast on how the pandemic will develop relates to this. But we hope that it will continue to ease and that we'll get back to full speed. So -- and that will obviously support the negative impact that we have on Eurocash.
Yes. And does that mean -- just very detailed, does that mean that it's apple-to-apple comparison when it comes to the 5% given that you added one store? I think you maybe removed one store as well and made it into Willys.
Yes, it's apple-to-apple, the 5% growth. So -- and then -- yes, and then the financial losses is slightly worse due to the [indiscernible].
Yes. Yes. Yes. Good. Could you -- if we then move on to the HoReCa business, Snabbgross, which grew by 13%. And there, we saw easing of restrictions by the beginning of June. So of course, probably the first 2 months were not that great, but probably a clear shift towards the latter half of the quarter going into Q3. Could you say something about the sort of the exit rate in Snabbgross if you grew by 13% for the entire quarter? What was the growth in June? And how should we think about in Q4?
Yes. I -- no, but I also think it's fair to say that it was not only June. We actually had a -- somewhat better as well in May, which I think also corresponds a bit to the Snabbgross' positioning. We serve a lot of cafe and restaurants, and not to say that you should talk too much about the weather and so forth. But it has been a fairly good spring that has supported these outdoor -- that consumers would like to sit outdoors and so forth. So it's not been only June to -- fair to say, but -- no.
Well, okay. But would you say that there's been sort of a good trend, of course, in the quarter moving into Q3? Is that a fair assumption?
Yes. But it's not that dramatic so that you can think that we were -- everything was coming in, in June. That's what I would like to reflect on.
Okay. But also, as you mentioned in your prepared comments, you saw some sort of light at the end of the tunnel also when it came to the pandemic and city locations, if I got you right, and maybe referring to Hemköp then. And Hemköp is, of course, also improving their profitability in the quarter. Would you say that sort of leading the quarter, Hemköp is -- outlook is looking up a little bit?
Well, obviously, when you look at the pandemic effects, it has -- we have been hurt significant in some of the city locations. As you know, we have large Hemköp group-owned stores in some of the larger cities, very downtown located. And traffic is -- has improved, but have to say still a bit from 2019 levels. So we are still a way to go, which very much relates to obviously -- still, we -- as customers or consumers are still urged to work from home, meaning that we are spending less time in our offices, spending less time traveling to these areas, so I think we want to see more of a more normal stage on that. So -- but as you point out, and you can see that reflected as well in the like-for-like compared to the market that has been an improvement, but still I think we still have some way to go.
Yes. Okay. And then finally, on the automization acceleration that you announced in a couple of sites today, is it obvious that you proceed with Witron when it comes to the Gothenburg warehouse but not when it comes to the Landskrona?
Yes. It's very different. It's completely different technology. So -- and this fits very well with us. First of all, the cooperation with Witron in Bålsta goes -- it's very much -- it's a very good cooperation. Secondly, as you know, e-commerce, the platform for e-commerce, we're now getting the same systems in Bålsta and in Gothenburg in terms of systems and data integration and IT, et cetera. So there's a lot of good synergies around that. So that fits well.Then the automation for fruit and vegetables is more similar to the automation we do in Jönköping where we already have KNAPP, which is a completely different automation process. So hence, therefore, we have 2 various or different suppliers with regards to this. But they also match us -- our operation very well.
Okay. Okay. So you're implicitly saying it's a lot of confidence for both these suppliers then.
Correct. Correct. And also confidence in the technique that is needed because it's different techniques in the various warehouses.
And then finally, on Bergendahls. If I read it correctly, the Swedish Competition Authority is already in second phase now of their study, and that was a couple of days ago. Is this a little bit delayed compared to what you initially thought by the end of May?
No. It is spot on time. They have the first 25 days, and then it is a large project, so to speak. There are many involved. They need to interview a lot of people and so forth. So it is according to our expectations that this will go into the next phase, which they announced on early this week.
Yes. And given that you're taking charges, does that basically mean that you are moving ahead with the assumption that this will go through, of course, and you are sort of executing on your plan already, not sort of awaiting the ruling?
Well, we have taken -- as the costs that we've had -- as you know, we have costs for all the advisers and legal costs when you go through this. So obviously, these costs we have. So -- but then, obviously, we do what we can in terms of planning, but we also -- we cannot go into any further integration until we had the verdict, so to speak. So that we are -- we can just do our internal planning, but then we wait for the decision. But obviously, we have some costs despite that, and that's what we have now.
The next question comes from the line of Gustav Hagéus from SEB.
I think we touched on it before, but I'm curious to hear your thinking about the decision with the size of these logistics hub, the Bålsta's 40% above current volumes and Backa's 30% above. And you showed that chart in this report that the market grows maybe 3% over time, and a fair share of that is inflation.So it seems a bit excessive to go so big initially as it will take also -- if you grow in excess of the market, it's going to take you quite some time to catch up with that. So is that -- I'm just curious, is that capacity also calculating [indiscernible] and optionality in terms of M&A or maybe category expansion? Or could you please let us in a little bit on the thinking of the size of it?
Well, I think, Gustav, you should see it as you -- when you were doing these investments, obviously, you don't want to -- you want to make sure that you plan for some growth for years to come. And if you're looking at Bålsta, as an example, we have then the opportunity to increase our capacity with 40% within the current facility. That gives us multiple room. Then there will be some of the -- you don't need -- you don't sit with overcapacity initially. You can add that as well further on. But it gives you room for that.And one should also say that this facility increases our opportunity for significantly larger range and assortment that open up for new opportunities. So for us, it just gives us flexibility for the long term, which we think is very positive.Relates to Backa, it is a bit of a different operation. We have made the conclusion that is the most cost-efficient way of running the volumes around Gothenburg with the increase in the high-bay warehouse as well as increasing specifically the automation for e-commerce that needs to be automated in conjunction with the -- near by the warehouse. So with the 30% capacity of the high bay, can we storage more, but also that we can use. It's not that we -- not a high extra cost for having that excess capacity. But clearly, we need to make sure that we are more efficient on the e-commerce logistics and hence, the investment.
Okay. And then I'm curious about your view on sort of threat of quick commerce rollout. A major player in Sweden announced they're -- they have a plan to expand sort of mini dark stores by a number of 50. I think it was 50 by year-end. In the event that the consumer behavior shift more towards very quick delivery for most products, are you able to follow that trend with current investments? They seem to be based sort of on another, say, logic than these quick commerce players.
No, it's true. And I think it's interesting to follow all these new initiatives that just gives the interest of our market, which I think is positive. And -- but I also think it's fair to -- you can look at it. It is -- I mean, currently, as you have the service trade today, and now this is -- I will see this as kind of a digitalization of the service trade where you -- it's not that you are -- in these cases, you are buying your weekly shopping of 40 kilos of shopping bags. It's just complementary and that needs to go quick, which is very much the service trade part.So interesting to follow. And I think that, currently, we are also having fresh deliveries, same-day deliveries with our e-commerce when you want to buy a full grocery bags. And I think this is an interesting part of complement the service trade for digitalization of that size.
But with your position, Klas, as the house of brands sort of company, you could -- in contrast to, I guess, to larger competitors, it seems easier for you to pick up the competition and do something on your own in this area. Is that something that is at all on the agenda? Or have you locked into more of a traditional online with larger facilities and working with...
Yes, I understand. No, it's a good comment. I understand. But I think that we have not locked in at all. We are following and we are closely looking into how the market develop. But I think it's fair to say it is very, very small today, and we need to see how that trend develops. Again, we have no own brands in the service trade, but we support the service trade. Today, with the -- we are distributing to the majority of the service trade today from a warehouse perspective, and we have not gone into an own brand on that. We follow this and see how it develops. And we have not locked ourselves into any -- that we will not go into this. But I think it's -- it also -- currently, it's fairly small.
And the next question comes from the line of Niklas Ekman from Carnegie.
Yes. Firstly, a follow-up here on the Eurocash. I'm just curious if you could say anything about the footfall, what that looks like towards the end of June and particularly in the beginning of July when I think restrictions have been eased further. I mean, first of all, are you seeing eased restrictions in all stores? Or are there some that are still significantly impacted by travel restrictions? And what kind of volumes or at least footfall are you seeing in the stores that have -- where the border has fully reopened?
Nik, the end of June, as you see on the numbers, not really impact on the footfall. It has opened up, but it was not that easy to cross the border. After July or beginning of July, it has opened up in certain areas. Some areas, not that easy. There are -- it's a variation, I must say. But in the one that is mostly easy, it has been -- I mean it's not 100%. It's more close to 50% footfall coming back. But I also have to say that it's encouraging to see that despite in some areas you have like 3 hours queuing time to get back into the country, they are still making a fairly hefty effort to make the trip. So it is still not that easy. But the restriction, as you've seen, it continues to open up and we hope will ease up even further. But a clear improvement in early July.
Okay. But you say one store is close to 50%, and the others are still lower than that. So you're still well below the 2019 level, basically.
I say the stores that is now relocated to the larger part, north of Bohuslän, is the one that, that border is -- that is close to 50%.
Okay. Very good. And then a general question here on online profitability. I'm just curious here because your earnings have held up really well here in the past 12 months in challenging times and in a period where online has grown from around 3% of sales in 2019 to close to 9% here in H1. And I'm curious because Dagab, obviously, has been a major earnings driver here even though a lot of online costs are taken for Dagab. So I'm just curious here if you can say anything about the total online profitability. Are you seeing that the absolute losses for your online business are similar to or could they even be lower than they were prior to the pandemic? Or how should we think about that?
We are overall lowering the absolute numbers, but still, it's still challenging. Particularly, the share of Click & Collect is also significantly improving. And there, we have a better situation. So that is much as far as guidance I can give.
And we have one more question from Magnus Råman from Kepler Cheuvreux.
A lot of questions already answered, but I can just come back to the exciting news about the e-com investment in Gothenburg. Could you perhaps elaborate a little bit around more numbers, say, cost per handed unit, what type of reduction in cost do you expect after you finalize this investment compared to the manual handling? Is it -- are we talking 10% reduction or a 50% reduction in cost per handling unit?
I think it's fair to say that we announced the Capital Market Day, and we will then give a little bit more detail in terms of how we look at this. We wanted to announce the investment now. And then -- but as you point out, we are significantly more efficient with this warehouse. And then also it is a volume case, as you may know. So as there are large investments involved, it is also based on how much volume we can get into the facility. So it is related somewhat to that when you look into cost per items and so forth.
Right. I was ready to rephrase the question to, say, payback time on investment if that is -- but I hear you now, so we'll wait for the CMD. But anyhow, perhaps I can just also ask about -- it's already been talked about the sort of rationale for choosing Witron here as well. But can you remind us, from the Capital Market Day when they presented, I believe that they had done very few or perhaps just a handful or even less dedicated online warehouse automation installations. Is that the same feature now? Or have they done -- do you have any examples of that they've done this type of installations previously?
Well, they have done several, but I don't sit on it handy right now. We can come back to that, obviously. But I think the solution that they come up with then, it fits very well with the needs that we have. We think it's a very competitive solution and it fits into our systems as well. So -- and they have experience on that.The new part that was kind of -- there was not too many that was built. That was a combination of e-commerce and physical stores in the same building when we launched Bålsta. There is nothing unique in each of them, but combination of them. And then obviously, it makes a lot of sense. And if you look at further along, many others is now looking into the same kind of structure where they combine the warehouse into one because, obviously, that creates an inefficiency in terms -- so you don't need to ship the goods from warehouse to the specific e-commerce whereas you are in the same area.
Right. And then just finally on e-com logistics thinking about the footprint in Sweden. I mean you closed down the Mat.se dark store in Malmö region. Do you expect to come back there with investments? Is that the next announcement we will have? Or is this what we're going to see in the coming years?
I think we'll follow and see how the market develops at the time. And still at the time, we think it's -- the volumes is more fitted for our Click & Collect solutions that we have in -- since both Hemköp and Willys are very active there with their solutions. So we cover the market from that angle, from the stores angles in that perspective. And we are not seeing, at this stage at least, that the volume is there for an automated warehouse system for it.So -- and then I think it's worth commenting to see how this developed and how it's evolved. If you look at the market data now in -- that was released this morning, the volume for e-commerce is -- the growth is going down. And if you look at -- the growth is significantly higher now in terms of value into -- back to the physical stores. So it is the post pandemic that we need to track and follow and see how this market develop and where it goes.We still believe in the mix. We still believe in the strong e-commerce. We are showing that we are growing faster in e-commerce versus the market. So we developed that. But we also think that the stores is playing an important role here. And I think we need to look at it, the post pandemic also, see how this evolves in terms of total volumes in this market, which is difficult to predict at this stage.
And as there are no further questions, I'll hand it back to the speakers for closing remarks.
Well, with that, thanks for listening and thanks for the questions. And I just want to end in saying wish you all a nice summer. Thanks.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.