New growth targets set for Axfood AB

New growth targets set for Axfood AB At an analyst and media presentation on 25 August, Axfood's CEO Mats Jansson charted out Axfood's strategy for the years 2004-2008, including new growth targets for the period through 2008. The starting point for this is the strategy that Axfood's board approved directly after the merger in 2000, where several of the objectives have already been achieved. Axfood presented its half-year interim report on 22 July and has a stable point of departure and base, said Jansson. "Axfood's wholly owned chains in Sweden today are showing the strongest growth in the market, with sales increase of 8.4% of which same-stores increased 5%. Behind these growth figures are several years of work on developing strong and distinct customer offerings," said Jansson. The new growth targets entail that the Group is counting on organic growth of 3.5% per year. The Group's long-term operating margin target, which was adjusted from 3% to 3.5% in 2003, remains unchanged. Willys, which currently has 85 stores, will grow its sales to approximately SEK 17 bn by 2008. The operating margin target for the same period is 4%. "Since 2000 Willys has grown from SEK 3.5 bn in sales to an estimated turnover this year of SEK 11.5 bn," continued Mats Jansson. "We have strong growth in our customer base, and judging from our market research, we also have satisfied customers. The sales growth of approximately SEK 5 bn during the next four years entail that we will be investing in an additional 25-30 stores." The Hemköp chain, which has shown clear improvement during the year, with strong growth in sales of 3.6% for comparable units, will be twice as large in 2005 following the conversion of Spar stores to Hemköp. Axfood's wholly owned Hemköp stores are expected to increase their sales from approximately SEK 6 bn to SEK 8 bn by 2008, with a target long-term operating margin of 4%. To achieve this expansion, Axfood expects to see growth at existing stores as well as new volume through the addition of 15-20 new stores through 2008. Today the Hemköp chain has 86 stores. "Following several years of hard work, it is very gratifying to see positive trends at Hemköp and that we can now shift into a period of growth. Already this year we expect to see a gradual earnings improvement - partly as a result of the major refurbishment of half of the chain's stores, but also due to a concerted effort to cut costs at Hemköp," said Jansson. Axfood's management also expects to see a turnaround for Willys hemma, which generated losses during its first two years. Earnings for this year are expected to be considerably improved. Resumed expansion can be expected thereafter. The new growth targets for Willys hemma are to achieve SEK 3 bn in sales by 2008 and an operating margin of 1%-2%. An additional 30-35 new stores will be added to the 45 stores that the chain has today. In Jansson's opinion, Axfood's wholesale companies, Dagab and Axfood Närlivs, will show stable development in the years ahead. "Dagab's sales will grow in pace with the growth of our wholly owned companies," noted Jansson. "In terms of operating margin, our goal is that Dagab will remain steady at 1.5%. Axfood Närliv's goal is to increase its sales to SEK 5, 2 bn by 2008. The operating margin target remains 2%." Axfood's subsidiary in Finland, Spar Finland Abp, has had weak performance in 2003 and 2004. The Finnish market is feeling the effects of new competition. Axfood's judgement is that the market share in Finland is too small from a long-term perspective. Axfood is therefore aiming to increase its market presence. "We are sticking by our ambition to grow in Finland," Jansson pointed out. "However, this must be pursued from a base of profitable growth. Until the day we succeed in finding forms for acquisitions or a merger, we will be concentrating on developing Spar Finland's ability to manage the competition. Our goal for 2008 is to maintain volume and profitability at their current levels. The sales and operating margin targets are SEK 6 bn and roughly 1%, respectively." During the presentation, Mats Jansson also shared his views on growth: "We see growth opportunities in three main areas. The first is growth through acquisitions and new store establishment, where we intend to establish and acquire between 70 and 85 stores during the next four years. The second is through new product segments or categories. One example of this is Super-Willys, where we have added a new range of specialty products. Our third growth area consists of the Nordic region, entailing acquisitions or mergers with companies in Sweden or other Nordic countries. In the future we will also be more receptive to partly owned companies surrounding individual concepts or store chains. "The big change today compared with four years ago is that we now see considerably greater growth potential in our Swedish stores - and thus opportunities for further earnings improvements compared with 2000," concluded Jansson. A presentation from the meeting can be found at www.axfood.se, under "Financial information". For further information, please contact: Mats Jansson, President and CEO, Axfood. Tel. +46-8-553 998 10. Bodil Eriksson, Executive Vice President, Corporate Communications, Tel. +46-8-553 998 17, Mobile +46-706-29 66 34. Axfood AB is a retail food group comprising the wholly owned store chains Hemköp, Willys and Willys hemma and wholesale operations through Dagab and Axfood Närlivs. Additionally, Axfood works with a large number of independent merchants who are tied to Axfood by franchising or other agreements. In all the Group comprises some 500 stores in Sweden, of which about 220 are wholly or partly owned. Consolidated annual sales are approximately SEK 33 billion, with approximately 8,600 employees. Axfood has approximately 290 stores in Finland, of which 80 are wholly owned and the remainder are operated by independent merchants. Axfood has a market share of 18% in Sweden and approximately 8% in Finland, making it one of the largest, listed retail food groups in the Nordic region. The company is listed on the Stockholm Stock Exchange 0-List, Attract 40. Axel Johnson AB is the principal owner with approximately 45% of the shares. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2004/08/25/20040825BIT21550/wkr0001.pdf The entire Release