Economic uncertainty and the prospect of lower food inflation has led Swedish retailer Axfood to only target flat operating profit in 2012.
Axfood, which saw cost control boost profits last year, faces continued uncertain trading conditions in the months ahead, president and CEO Anders Strålman said.
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“Indications are strong that the Swedish economy and consumption are slowing and that the turbulence in Europe is creating uncertainty among households,” Strålman said. “At the same time, we believe that food inflation will be low and likely will not exceed 1%. In addition, union negotiations on new pay agreements are scheduled for the spring, with an uncertain outcome.”
Strålman was speaking after Axfood, which owns 237 stores under the Willys, Hemköp and PrisXtra banners, reported a 3% increase in profits for 2011. The retailer, which claims a 20% share of Sweden’s retail market, booked a 3.4% increase in profit after tax to EUR891m (US$1.18bn) despite a 0.4% dip in fourth-quarter earnings.
Operating profit was up 3.4% at EUR322m in 2011, although it slowed in the fourth quarter. Axfood reported a 0.3% increase in operating profit in the last three months of the year.
However, Axfood, which has a franchise partnership with some Hemköp stores and also runs wholesale operations, struggled to generate higher sales from its own outlets.
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By GlobalDataIts annual consolidated net sales increased 1.6% to EUR34.8bn. Axfood said store sales, which include a contribution from Hemköp franchisees, were up 2%. However, sales from the stores it owned inched up only 0.1% during the year and like-for-like sales from the outlets fell 1.5%.
In the fourth quarter, the growth in Axfood’s consolidated net sales slowed to 0.3%. Store sales grew 5.9% but sales from Axfood’s own stores fell 0.8% and like-for-like sales were down 2.7%.
