Axfood Aktie

Good morning, everyone, and welcome to the Axfood Second Quarter 2026 Earnings Presentation. My name is Alexander Bergendorf, Head of IR here at Axfood.

With me today are Simone Margulies, President and CEO; and Anders Lexmon, CFO. In the Investors section of our axfood.com website, you will find the presentation materials for today's call. We encourage you to have that presentation at hand as you listen to our prepared commentary. After the presentation, we will be taking questions. A recording of this call will be made available on our website.

With that, I will now hand over the word to Simone. So please go to Page #2.

Thank you, Alex. Axfood maintained a high level of activity during the second quarter with focus on further strengthening presence, competitiveness and efficiency. We delivered positive growth and increased earnings against high comparison figures in a market characterized by food price deflation.

We are well positioned for the future and continue to pursue our long-term strategic plan, while we, at the same time, implement targeted tactical measures to strengthen our growth also in the short term.

Turning to Page 3. With that very brief introduction, let me now take you through recent market developments and Axfood's second quarter performance. So let's move on to Page 4.

Market growth amounted to 3.7% during the quarter, which was a somewhat lower level on a sequential basis. However, compared to the first quarter this year, there was deflation in food prices that impacted market growth negatively. As you all probably know, the VAT on food was reduced on April 1 from 12% to 6%, and this was fully reflected in the price development on the market. But also excluding that effect, there was deflation, mainly driven by lower prices in the dairy category.

In total, the annual rate of deflation was minus 6.2%, including VAT, according to Statistics Sweden. And excluding VAT, the deflation is estimated at minus 0.9%. Adjusting for the deflation and a negative calendar effect of minus 0.3%, market growth was strong at 4.9% -- it is, of course, still early days to determine how the reduced VAT has affected consumer purchasing behaviors. But that said, the second quarter development of the market clearly shows an improved volume trend.

At the same time, the world around us remains uncertain, and it's also clear that consumers continue to focus on price value. Next slide, please, #5.

Axfood's retail sales increased 2.1% in the second quarter, also driven by higher volumes. We faced high comps from last year, and we really outperformed the market then by quite a large extent, and this is evident if you analyze the development over a 2-year period. This is shown in the chart to the right on this slide. Last year, we also had contribution from City Gross. Despite the strong sales increase last year, deflation and the negative calendar effect, growth did not reflect our ambitions.

We are now on Page 6. Consolidated net sales for Axfood grew just below 1% in the quarter. And as I just mentioned, this was mainly driven by higher volumes. The development varied between our various retail chains. Hemköp really stands out this quarter with continued very strong growth.

As for City Gross, as a reminder, total growth continues to be impacted by store closures. So please go to the next page, #7. In all, we report increased earnings in the quarter despite the lower growth. Group operating profit increased to SEK 964 million, and the operating margin was higher at 4.2% Operating profit included items affecting comparability of minus SEK 8 million related to City Gross.

Last year, items affecting comparability also related to City Gross and amounted to minus SEK 25 million. On an adjusted basis, operating profit increased to SEK 972 million, and the margin was flat year-over-year, amounting to 4.2%. The improved profit was primarily driven by higher sales volumes, a stable gross margin trend and effective cost control.

Earnings were negatively impacted by deflation and also costs of SEK 40 million due to higher fuel prices. Joint Group reported a narrowed operating loss, partly due to cost savings from our measures to improve efficiency within and between the Group's support functions, including workforce reductions.

Let's now turn to Willys on Page 8. The high comps we faced this quarter was mainly in Willys. Last year, Willys really outperformed the market as growth in the period amounted to 10.2% compared to 6.1% of the market. In addition, Willys growth this quarter was negatively impacted by deflation.

In all, Willys grew 1% in total and minus 1% on a comparable basis. With the negative growth in like-for-like sales, earnings declined to SEK 524 million, corresponding to an operating margin of 4.2%. The gross margin development was stable.

I will get back to Willys development and strategic agenda later in this presentation. But for now, let's turn to Page 9 and Hemköp. As I mentioned, Hemköp continued to demonstrate a very strong performance in the second quarter and clearly increased its market share once again, delivering retail sales growth of more than 7%. Growth was driven by higher volumes with an increase in customer traffic and in addition, a higher average ticket value contributed positively.

On the other hand, deflation impacted growth negatively. Like-for-like growth was also very strong. In total, operating profit increased to SEK 123 million, and the operating margin was also higher at 5.4%. The development was mainly driven by the increased sales gross margin and solid cost control.

Turning to Page 10. With the City Gross acquisition, we have taken position in the attractive hypermarket segment and work to develop the chain so that it can become a long-term competitive player is ongoing.

This quarter, City Gross once again delivered a positive profit development with a narrowed operating loss. In total, the loss amounted to minus SEK 11 million on an adjusted basis, corresponding to an operating margin of minus 0.5%.

And City Gross reported somewhat weaker growth this quarter, so the improvement was mainly due to effects from structural measures as well as efforts to streamline operations.

On a reported basis, the operating loss amounted to minus SEK 3 million, which corresponds to an operating margin of minus 0.1%. This included the items affecting comparability I mentioned, which refers to structural measures for stores.

In late May, City Gross closed its store in Länna, Stockholm. It's fourth store closures so far. Later this summer, City Gross will be closing down its Helsingborg store, which will be converted to Willys during the fall.

We are now on Page 11. Snabbgross sales were unchanged compared with the corresponding quarter last year, both in total and on a like-for-like basis. Earnings were just slightly below last year. The gross margin trend was stable, but the weak sales development could not offset the cost inflation.

In total, operating profit amounted to SEK 93 million corresponding to an operating margin of 5.8%.

Next, Page #12. Dagab's second quarter net sales increased by approximately 1%. As for the development in our retail chains, growth was negatively impacted by deflation, so also here, the development was driven by higher volumes, mainly to Dagab's food retail customers and especially Hemköp. Operating profit amounted to SEK 280 million and the operating margin was 1.3%.

Earnings were negatively impacted by deflation, market investments and increased cost due to higher fuel prices, which I mentioned earlier.

Improvements in productivity from our new logistics structure had a positive impact on the profit development. Dagab continues to optimize the flow of goods to further improve efficiency and productivity but also continue to invest in transports with ambitions of electrifying 50% of its vehicle fleet by 2030. In addition to investments in logistics, the company maintains a high pace of assortment development, launching 60 new products under our private label brand during the quarter.

That concludes the first part of today's presentation. Now it's time for me to give -- hand over to our CFO, Anders, to take you through the financials. And we are now on Page 13. But please go to the next page, #14. And Anders, please go ahead.

Thank you, Simone. During the first half of the year, net sales for the group increased 1.7% to almost SEK 45 billion. Retail sales increased 2.9%, which was lower than the market in total, where growth amounted to 4%. Adjusted operating profit increased 4% to almost SEK 1.8 billion.

The operating margin increased by 0.1 percentage points to 4%.

Next, Page#15. During the second quarter, the cash flow was minus SEK 47 million, SEK 86 million lower compared to last year. Cash flow from operating activities and net working capital was negatively impacted by the VAT cut on food from 12% to 6% as of the first of April.

The negative cash flow investment activities of minus SEK 376 million in Q2 was somewhat lower compared to last year, mainly driven by lower investments in warehouses and IT. Investments in our retail operations were in line with last year. The increased cash from financing activities was explained by lower amortization of credit facilities compared to Q2 last year. By the end of Q2, Axfood utilized approximately SEK 2.8 billion of our credit facilities compared to SEK 3.1 billion by the end of Q1.

Please turn to next page, Page #16. Net debt increased compared to year-end 2025 due to higher leasehold debt utilization of credit facilities and lower level of cash. The net debt-to-EBITDA improved compared to Q1, thanks to a strong EBITDA development and the lower net debt. The equity ratio amounted to 19.1%, which was lower than in December 2025 due to the dividend. The Q2 equity ratio was, however, 0.9 percentage points higher compared to Q2 last year.

Investments, excluding leasehold debt and equity amounted to SEK 927 million during the first 6 months. Year-to-date, we have established 7 new group-owned stores, which was in line with this year. Compared to last year, investments in store establishment and warehouse automation has increased while investments in IT and trucks has decreased.

Please turn to next page, Page #17. Axfood has a solid negative net working capital. The recent VAT cut has, however, had a negative impact and consequently, the 12-month rolling KPI was negatively impacted in the first 6 months. Capital employed has increased in recent years, mainly due to the acquisitions of Bergendahls Food and City Gross as well as investments in our Bålsta Logistics Center.

The level of capital employed has, however, decreased slightly since year-end, as equity was reduced not only by dividend paid, but also the dividend to be paid in Q3. This effect was partly offset by higher leasehold debt. Thanks to improved earnings and the reduced capital employed, ROCE improved by 0.9 percentage points compared to 2025.

And with that, Simone, I'm finished with my presentation. So I hand over to you again.

Thank you, Anders. We are now on Page 18, and it's time for me to give you a more detailed update on our strategic agenda and priorities. So let's turn to Page 19. We have a clear house of brand strategy in our group, and this makes us unique in Swedish food retail. We aim to deliver the strongest customer experiences, and we are present in all segments of the market with our different concepts. So please next Page #20.

With a continued strong position, Willys is the store chain most recommended among households. Willys continues to develop its customer meeting and upgrade the store network to the latest Willys 5.0 store concept. By the end of the year, 70 of Willys store in total will be according to the Willys 5.0 concept. At the same time, new Willys stores are being opened at a rapid rate to reach even more consumers. And the total store count is now 254.

We're seeing strong growth in both newly established and refurbished stores. Just recently, Willys passed the milestone of 4 million members in its Willys Plus loyalty program. So it clearly has very wide reach which it can build on.

Willys also focuses on increasing the growth rate in the short term through targeted tactical measures. We are now on Page 21. With prime store locations and an attractive affordable assortment focused on inspiration and sustainability, Hemköp's momentum continued to be strong, and its growth was double the rate of the market in the second quarter. This really is the long-term work to strengthen the stores chain market position.

Hemköp also continued to invest in modernizations of existing stores to further improve the customer experience. In total, Hemköp has 2.2 million members in Club Hemköp loyalty program.

Turning to Page 22. For City Gross, a highlight of the quarter was the launch of its new store concept at the pilot store in Linköping. City Gross has been working on this for some time, and the concept is developed based on our new strategy to revitalizing the brand. The goal here is to create a vibrant food market with a relevant assortment and fresh produce in focus. When developing the concept, scalability has also been key as well as creating conditions for efficiency in store operations and sales management processes. It is positive that City Gross now has this pilot in place. Going forward, we will evaluate the concept and make necessary adjustments where we see it fits.

We are now on Page 23. To create the right conditions for retail concepts to be able to succeed in the market, we leverage our strength as a group and focus on 6 strategic development areas. We have shown you this before, and I covered selection last year. Now I want to focus a little bit on 2 of these, operational efficiency and sustainability.

So please turn to Page 24. Working cost effectively is part of our business model, and it's particularly important as we work to mitigate the effects of food price deflation. Above all, we are continuing to optimize the productivity and cost efficiency of our new logistics structure by also developing new ways of working using new technology and scaling up our use of data and AI. Our efforts to streamline the group's support functions are also continuing to enable cost savings.

Next, Page #25. We aim to be a positive force in society, taking the lead in promoting a sustainable food system and contributing to better public health, not least through assortment development and research collaborations. During the quarter, we launched new innovative products that promote sustainable and healthy consumption, including light meals made with hydrothermal treated whole grain rye that enables the body to absorb essential minerals.

We also launched hybrid products combining meat with vegetables.

In the quarter, we had a good volume development in fruit and vegetables, which contributed to an increased share of sales from sustainability-labeled products. We are also continuing the positive effects from our transition to renewable fuels and electricity through reduced transport emissions.

During the quarter, the share of electricity in the fuel mix increased significantly to almost 14%, up from just below 5% a year ago.

In late spring, our new ambitious climate targets were validated by the Science-Based Target initiatives, marking an important milestone in our efforts to reduce our negative impact on the climate and biodiversity.

I would also like to highlight the Group's focus on diversity and inclusion. One example is that we contribute to helping young people in vulnerable areas enter the workforce by providing them with paid jobs under our Studiemotiverande Arbetslivsorientering, which is a combined school and work experience program, which we now are expanding and through the newly established forum for inclusion.

Moving on from our strategic agenda, and we are now on Page 26. Our outlook for the year is unchanged, and it covers investments, new store establishments and items affecting comparability.

With regards to the new establishments, in total, we opened up 3 new group-owned stores in the quarter, all of which Willys. And as Anders mentioned, for the year, we have 7 new stores establishments.

So please now turn to Page 27. So let me conclude. I can now summarize a quarter marked by a high activity level and increased earnings. We have strong market positions, clear strategic priorities and several ongoing initiatives to strengthen our presence, competitiveness and efficiency.

With distinctive concepts and shared culture and focus on execution, we are well equipped to continue to develop and create value over time. And that was all for today.

So now please turn to Page 28, and I hand over to the operator to open up the line for questions.

[Operator Instructions] The next question comes from Fredrik Ivarsson from ABG Sundal Collier.

I hope you can hear me. First, regarding the growth in Willys maybe. So last quarter, I remember you mentioned that it was impacted by a few things like temporary store closures and some store modernizations. Would you call out any similar, let's call it, one-offs impacting the market share in Q2?

Regarding the growth of Willys, I would say Willys has really, really high comparison figures, growing more than 10% last year. That, together with the price deflation, make them have a weaker growth this quarter. However, we wish to see a stronger growth. And that's why we're also taking some tactical measures now. So in the short term, improve the growth of Willys.

Okay. So no similar impact as we saw in Q1. And on those tactical measures, what's that? And what's your assessment of the price positioning versus the market at the moment you need to widen the gap? Or is it anything else you talk about?

To start with, we don't comment exactly the strategy. However, for us, the most important is to have the cheapest bag of groceries and that we continue to have that for Willys. And regarding the tactical measures, it's measures to increase traffic to the stores on a short term.

Okay. Fair enough. And on the higher fuel cost, SEK 40 million, obviously, I guess, difficult to say where the HVO prices are heading. But at the current level of, I think, it's around SEK 30 per liter. The headwind should become slightly lower in the back half of the year? Is that your view as well?

Yes, Fredrik, we have to come back to that. But obviously, it's depending how the situation in the Middle East is developing and how the prices [indiscernible]. So we have to come back to that.

Okay. And last for me before I jump back into the queue. You didn't call out any impact from the temporary cut in employer tax for young workers this quarter. Was this not significant? And will it impact rather Q3?

It's -- of course, it's positive with -- as you said, the reduced tax for employees, which has a positive effect. It's not as we see significant since we also have the, I'd say, the normal inflation in salaries that is much, much bigger. And it's -- since we singled out the fuel, this is obviously not in line with that, I would say, that amount.

The next question comes from Niklas Ekman from DNB Carnegie.

Can I ask about City Gross where you're seeing reduced losses now, but both like-for-like and store sales here are negative. Obviously, partly related to store closures. But can you talk about any efforts here to reverse the sales trend? Or do you think focus still in the short term is mainly on improving the profitability?

I mean, for us, I think I said it before to create profitability. Of course, you have to do it through attracting customers and drive volume and then you get the profitable growth. And as you said, the sales in City Gross on total is affected by store closures, and we have a negative like-for-like sales in City Gross. And of course, we would like to see stronger growth in like-for-like for City Gross. They are affected a lot of the price deflation, I would say.

So for us, it's to have the balance between all the parameters. However, we see a good -- we're following our plan, and we see the increase in the -- I would say, profitability -- the loss is lower and we're following our plan. So that's why we also reiterate the goal to be profitable sometime in the second half of this year. And we have to be that together with growth in like-for-like sales. So we said before and that's what we're working towards to create a healthy core where we have both sales growth in like-for-like and also making a good development in both the brand and also the customer, I'd say, the customer meeting.

Can I just ask how is City Gross impacted by deflation. I can see why Willys will lose some of its attractiveness when price is not the key focus area. But I think for City Gross, you shouldn't see that impact. They should be able to drive traffic even with lower prices? Or did I miss something there?

Maybe I was unclear. The deflation, since we do not single out volume or mix or deflation, the deflation decreased the top line.

Okay. Okay. Fair enough. And also just in general here, if you look at the industry, it's been impacted. There's been quite significant margin pressure in the last 2, 3 years, quite significant price pressure. Are you seeing any signs of this easing now and particularly since we saw the VAT cut? Or are you seeing still a very tough price competition among your competitors?

No. I can confirm that it's still a very high competition in the market. I would say it's unchanged. It's been a high competition for a couple of months or a couple of years now. So that is market climate, high competition. We have the VAT reduction and then we also have any deflation on top of the VAT cuts.

And also on that, I think it's important to single out that we have really, really high comps from last year, the highest comp in the market. And that's also why we're really -- I'm glad that we still continue to have a very stable margin and increase our profitability because in this climate where we have increased costs for salaries and for fuels that we singled out. And with not -- of course, we wish some higher growth, but still we can continue to increase our profitability and have a stable margin, which is important for us, of course.

Very good. And just some details here on store openings. Can you quantify how many store openings you're looking for in Q3? And also if -- you mentioned another City Gross conversion here later this year. Do you think that -- are you happy then? Is this this kind of the last of the initially planned store conversions? Or do you think that there could be room for additional City Gross stores to be converted?

So we made 7 new stores this first period, and we are aiming 10 to 15 new stores for the year. And those are incremental 10 to 15. And for City Gross, we are continuing in the structural changes we're doing. So it can be more.

The next question comes from Daniel Schmidt from Danske Bank.

A couple of questions from me. And you talked about sort of price being at the top of the agenda still for consumers. Is there any sort of change in consumer preference at all you think given the performance of Willys and I hear you clearly when it comes to the comp base and so on. But is there any sort of feeling that location is back a bit higher on the agenda again and inspirational assortment and all that for the consumer in Sweden?

It's still a little bit early to do any large conclusions since we also in the quarter have Easter and we have mid-summer. But we see in the market as a whole, a stronger volume growth since the reduced VAT. And we also see increased growth in sustainability label products and also fruit and vegetable, which we haven't seen for now a couple of years.

So that's really -- we're happy to see that. So we have some mixed effects regarding sustainably labeled and also fruit and vegetable. However, we see still a very strong focus in price awareness and -- and that comes together also from the high competition in the market, I would say.

Okay. But given the first thing you're saying here, is that also why you feel that with the Willys 5.0 converted stores, are they surprising you positively? Or did you expect a good sort of outcome of those conversions?

The outcome of that Willys 5.0 you asked no?

Yes, which is bringing more inspirational assortment and shopping experience.

Yes. So we work very systematically with our development on new store concepts. So we start with making a store concept. We test it, we do pilots, and we do say we do changes until we think it's 100%.

And then we escalate the scaling up of them. So regarding the Willys 5.0, we did this last year. And so we feel pretty sure now that they are really delivering. So we see now when we modernize store, we get really good results of that. And also when we do establish new stores, we do them in the new store concept, and they take a really good market share from a very good start.

And one other thing that is within Willys, they have high comparison figures this quarter. However, we see that we continue to attract new customers. So we reached the milestone of over 4 million customers in the Willys Plus loyalty program, which is a good receipt that the customers continue to like Willys.

Yes. And of course, when you talk about short term sort of to strengthen growth in Willys and targeted technical measures or tactical measures, sorry, it sounds more like increased promotional activity rather than converting really Willys store to 5.0% in a faster pace, so maybe that's not doable. Is that the right interpretation?

I would say Willys has a really, really strong position. And we have -- we continue to invest strategically in a modernizing the stores and also establishing new stores. For us, it's more about the shorter-term tactical measures that we are addressing now.

So we feel really secure in the Willys concept, the new stores that we're establishing, the new concept, and we will continue to invest in that. And then we do some tactical measures now in the short, short term.

Okay. And is there any way to mitigate the fuel price hit that you took in Q2? And just looking at HVO prices, they are about the same level now as they were in Q2, and you talked about converting to electricity-driven transports, and you've done a lot in the past year, is there any way to speed that up?

I think we have a plan on how to invest in transport and we have the goal of reaching 50% of our fleet -- electricity rate of 50% of our fleet to 2030. So we continue to work according to that plan, actually. And then I would say that the margin that we continue to have a stable margin in this market where we have deflation, and also increased -- food price deflation, increased costs. I think that's a good proof of how we work with cost efficiency within and how also our new logistics platform actually is delivering.

Okay. And on costs, finally, group cost surprised positively far below last year and far below what I expected at least. What is the true baseline here? What is sort of -- what is the right modeling going forward?

It's quite hard to give you an exact baseline here, Daniel. But -- and as you know, it can differ from quarter-to-quarter. But it's clear that we now are on a new level compared to previous years, and we see effects on the efficiency programs that we did last year.

Okay. So it's a good indication of what to expect in the coming quarters, what you did in Q2?

Yes. It's not far away, I would say.

The next question comes from Magnus Råman from SB 1 Markets.

Most topics have been discussed here, but maybe I could just ask again about these tactical measures that has been discussed. Do you see that competition have been implementing these tactical measures and that you want to follow those? Or is more proprietary measures?

I always think that we have distinctive concepts and each of our concept has their own way of doing things. So it's not about just copying what others are doing. So it's about taking technical measures regarding customer insights that we have for the Willys customers and addressing them very, I would say, targeted to drive more traffic.

Right. Then on the price competition that has been discussed as well, and you mentioned it remaining high. Still isn't it fair to -- or haven't we been living with an extraordinary circumstance in Q2 given the freezing of prices amid the halving of the VAT. And do you think that this sort of frozen price picture will remain in the second half of '26? Or would that be unfrozen, so to speak, now going forward?

I would -- I'd just like to clarify, we didn't freeze any prices. We froze them just the week when we changed the prices in store, and that was a systematically freeze just to be able to handle over 8 million different price changes in our systems. So as we said, we have had a food price deflation during this period, which shows that we haven't frozen any prices. I would say this quarter is a little bit different.

Willys has performed very strong in many years. But however, they have had also some extra boost during last year when we had some inflation. And the same way we had a boost during the years -- in 2022 when we had a large inflation.

That's why we think it's important to look on Willys in a little bit longer perspective.

So for the Q2, we meet this comparison figures of over 10% and also the food price deflation. So that's also why we wanted to show the 2-year stack growth since we know that Willys get some extra push when the inflation is. However, they've growing a lot over the years, both good economies and weaker economies. So I think that in total makes it a little bit weaker for Willys. And also, we would like to see more growth in Willys and that's why we do these tactical measures.

But the tactical measures are they expected to weigh on the profitability?

I mean we drive -- I would say we drive profitable growth in balance. So first, we have to -- we drive traffic loyalty and then that's how also we grow profitability. So I think it's easy. You can see when we do not -- as we did this quarter in Willys had a positive like-for-like growth, it's difficult also to get the profitability with us. So that's why it goes hand in hand.

But it didn't when you did the tactical price investments in halving the VAT 2 days or a few days in advance. So how do you think about it in that perspective?

There are different tactical measures you can say, aren't they?

Yes. But you alluded to these being price cuts, as I read you.

I said it's about driving traffic to the stores.

The next question comes from Erik Sandstedt from Kepler Cheuvreux.

Just a follow-up on Willys here. Did you observe any changes in terms of customer shopping behavior in the quarter like fewer shopping occasions, lower basket values or increased cross-shopping with competitors that help explain the weaker performance?

As I said, it's a little bit early to today doing a larger conclusion since we have calendar effects also and we have Easter that was in the beginning of this quarter and not in March as last year. However, we see some increases in fruit and vegetable sales and also the share of sustainability labeled products that we can see.

Yes, fair enough. And then moving topic. In terms of the cash flow, you highlighted VAT as a headwind to net working capital, but what was actually the impact and the mechanics behind it? And is this a timing effect that should reverse over the coming quarters?

Yes. If you look at negative impact in the first 6 months, of a little more than SEK 700 million in net working capital, I would say approximately 50% of that is according to the VAT cut. And obviously, when this reduced tax is reversed, we will see the opposite effect and the positive effect for us when we come to that moment.

Okay. So it's only if the VAT is reversed that you will get that benefit back?

Yes.

Yes. Okay. I understand. Good. And then just finally, in terms of your online business, it's continuing to grow quite fast. What have you said in terms of profitability there if you compare it to the store network? Is it diluting margins? Or where are you?

As you said, we have a strong position in the online sales and the new Bålsta warehouse is to make the handling for home delivery more efficient in our online sales. I don't think we'll go into details on how reporting about our margins in our online sales.

Okay. But could you say whether it has been on an improving trend lately?

It's pretty much the same, I would say. And if you wonder if that is diluting the margin in Willys, that is not the case this quarter. The case this quarter is a negative sales in like-for-like in Willys that is diluting the margin.

This is Alexander. Just on that, I mean, obviously, I mean, profitability in terms of the online sales is obviously lower than store sales. So when online grow faster than our total growth or store sales growth, obviously, that has a dilutive effect on our margins, but it's small. I mean there are other effects that impact the margin development more than that, obviously.

The next question comes from Richard Trainor from Bernstein.

I'm interested in Hemköp's outperformance. I'm wondering, can you share anything about the drivers behind that? In particular, I'm wondering if there's any impact of newer and refurbished Hemköp stores versus older stores and also whether you're seeing any trading up from Willys to Hemköp?

I'm very happy to get the question about Hemköp. Of course, we're really glad to see the development in Hemköp. This quarter, they grew double the pace of the market, and it's the result, I would say, of a long-term job that they've been doing for a couple of years now by starting to revitalize the brand also and also developing new store concept, having a high pace in modernizing stores and also high pacing development -- developing the -- both awareness and price worthiness and also the assortment.

And I would say we've seen a good growth for Hemköp for a couple a couple of years now.

So I think it's a result of a long-term job that they've been doing now for quite some time. And -- what's happening is that the consumers are actually finding Hemköp stores and also recognizing the changes that's been made.

So I think it's the result of all these different things, both that we had new modern stores with a new attractive store concept, focus on inspiration, meal solutions and sustainability and also price value.

Great. And my other question is on City Gross, if I may. I'd be interested in hearing what some of the elements are in the trial store and how that will position City Gross to win on the customer proposition versus competitors?

And I guess, second part of that is, if the trial store concept is a success, does that mean that another wave of capital expenditure will be needed to roll that out to the other City Gross stores?

So the concept is in the store in Linköping. And we've done a job in this turnaround plan to also set a new brand proposition. And now this new concept is to demonstrate the new brand with a focus on fresh produce, inspiration of food and create a really inspiring food market. And also how to do that in a cost-efficient way in creating operational efficiency also in the store.

If this, of course, as always, you have to do a lot of changes when you do a pilot store until it's 100%.

So now it's up for us to evaluate it and do changes if there is needed. And when we think it's 100% correct, we will modernize stores, but that will be as a part of our total expenditures. So it's a natural part in driving retail to modernize stores. So when we modernize the City Gross stores, we will then do it by this new store concept.

I see. So it's not necessarily a fast additional rollout program for the new concept of City Gross?

No, no.

[Operator Instructions]

The next question comes from Robert Joyce from BNP Paribas.

The first one, just back to those tactical measures, I guess, slight concern if we look back to 3Q '24 when we saw that kind of 100 basis point margin decline that we kind of weren't anticipating. Should we expect margins to be down in the third quarter again even if we see a bit of like-for-like up until we start to recover with volumes after that? Or how are we thinking about margins in the third quarter at Willys, please?

We don't do any guidance on margins per concept. And of course, over time, we have a long-term goal for our group to reach 4.5%. And Willys, of course, is to be a part of that.

The tactical short-term initiatives is not the same as we did in the autumn 2024, it's not the same thing we did, you mentioned, during the VAT cut. So now it's more about targeted customer data insight-driven measures.

Okay, which don't -- I guess the question is why are they not ongoing those type of measures if they're going to drive the top line and not the margin hit?

I tried to explain the first quarter. The VAT reduction in Sweden is a huge change for the market, all the logics in how pricing, campaign mechanics changes overnight.

So just to give you an example, if you have a good price for salmon campaigns 1 day, then the prices cuts 5.4% because of the VAT. So then the mechanics, both -- what is a good price, how is the campaign mechanics work, two-for-three, three-for-four, the day after. And that is what has changed when we meet today from when we met after first quarter.

So now it's more about calibrating and find these tactics and to see that they become efficient. So there's been a huge change in the market when you cut the prices by 5.4% and to create new attractive mechanics in the market. So that is a -- what's happening now.

Understood. Okay. Understood. So you kind of have to evolve with the way the market has moved. That makes sense. And second one is just in terms of that sort of volume I guess, the number ex-inflation we see. Is it more mix driven or more unit driven the sort of volume growth you think in the market right now?

You mean if you take away the deflation, if it's volume or mix, no?

Yes, yes, exactly. Is it units or mix?

It's a mix of it. I think it's primarily driven by volume.

Okay. That's helpful. And in terms of anything you can say on exit rates, are we seeing anything, any differences? And obviously, Easter distort things, but by the back end of the quarter, are we seeing better trends?

We do not really comment month by month. So it's a quarterly performance we report. And of course, this quarter, we have some calendar effect also with the Easter beginning. And so we do not really comment on monthly development.

And then the final one -- sorry, understood. And final one, just on the working capital impact from VAT, is it going to be slightly higher at year-end?

Are we thinking sort of SEK 500 million? I just take sort of 6% of the payables balance I'm getting to a SEK 500 million impact at year-end. Is that about right?

No, the one-off that we took now, that's not going to be higher in the rest of the year.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you all for joining us today and for all the good questions. And I wish you a good summer and see you next quarter.

Good morning, this is the Axfood First Quarter 2026 Telephone Conference. And with me today are Simone Margulies, President and CEO; and Anders Lexmon, CFO. In the Investors section of our website, you will find the presentation material for today's call. We encourage you to have that presentation at hand as you listen to our prepared commentary. After the presentation, we will be taking questions. A recording of this call will be made available on our website.

So with that, I will now hand over the word to Simone. So please go to Page 2.

Thank you, Alex, and good morning, everyone. We summarized the quarter with volume growth, improved efficiency and increased profitability, and that's in a market that is characterized by a high activity level. Through a clear customer focus and collaboration, we continue to create value with our strong and distinctive concepts.

Before we start the presentation, I briefly want to comment on the situation in the world around us. It is clear that global uncertainty has increased over the past few months, and it's currently very difficult to assess the long-term effects of the war in the Middle East. In recent years, we have successfully navigated a volatile and uncertain environment, adapting quickly as conditions have changed, and we're carefully monitoring developments.

Turning to Page 3. With that very brief introduction, let me now take you through the recent market development and Axfood's first quarter performance. So next page is #4. Market growth amounted to 4.4% during the quarter, a similar level compared to the fourth quarter last year. Stronger volumes contributed to this development as the annual rate of food price inflation came down and amounted to 1.7% according to Statistics Sweden. Inflation decreased gradually during the quarter and particularly in March when the overall price level was unchanged compared to the prior year. This was mainly driven by the dairy category, but prices were also lower in several other categories, including fruits and vegetables. In addition to the improved volume trend, a 0.5% positive calendar effect from Easter also contributed to the market development this quarter.

So please go to next slide, #5. As a result of positive volume traffic and high volumes, Axfood retail sales increased 3.8% in the quarter. This was below the market and also lower than what we had hoped for. Excluding City Gross, where sales have been impacted by recent store closures, growth was in line with the market. Over a 2-year period, we continue to clearly outperform with contributions from City Gross. Competition remains intense and in general, market dynamics continue to be characterized by a strong focus on price value. As you all probably know, the VAT on food was halved on April 1 from 12% to 6%, and this measure was implemented just before Easter, which typically is an important holiday for the industry.

With this, the overall activity level of the market was particularly high. In Axfood, we worked intensively during the quarter to prepare for and implemented VAT reduction. Through extensive collaboration and focus on execution throughout the organization from stores and support functions to Dagab and Axfood IT, the price points on millions of items were updated in a very short amount of time.

We are now on Page 6. Consolidated net sales for Axfood grew 2.6% in the quarter. And as I just mentioned, this was mainly driven by higher volume. We saw growth in all of our segments, except City Gross. And there, as I just mentioned, it is, of course, important to consider that total growth was impacted by store closures.

So please go to the next Page #7. We report a strong financial development in the quarter. Group operating profit increased to SEK 806 million, and the operating margin was higher at 3.7%. Operating profit included items affecting comparability of minus SEK 6 million related to City Gross. Last year's items affecting comparability also related to City Gross and then amounted to minus SEK 38 million. Operating profit and margin on an adjusted basis, which excludes items affecting comparability also increased. Adjusted operating profit was SEK 812 million, and the adjusted operating margin amounted to 3.8%. The improved profitability was primarily driven by higher sales volumes and growth in both total and like-for-like sales, a stable gross margin, improved efficiency and also an effective cost control.

So now let's turn to Willys on Page 8. Willys continued to demonstrate volume growth in the quarter through an increased number of customer visits and a high ticket -- average ticket value, but total growth was below the rate of the market. Store establishments contributed to growth, although the new stores in the first quarter were established late in March and as such, only contributed to a small extent. In recent months, Willys has temporarily closed 2 stores ahead of relocation and together with ongoing larger store modernizations, this impacted growth negatively in the first quarter.

Earnings grew to SEK 498 million, which corresponded to an operating margin of 4.1%. The increase in operating profit was primarily driven by the increased sales volumes and a stable gross margin development. Willys is Sweden's leading discounter and 2 days before the VAT reduction, Willys chose to lead the way by reducing prices corresponding to the lower VAT. This, together with the increased marketing activities, which were largely concentrated to the end of the quarter, negatively impacted sales and profitability. As I mentioned, Willys store expansion progress was also concentrated to the end of the quarter. Even though the expansion pace remains high and based on the chain's strong position among consumers, there is significant potential to increase the market presence.

We are now on Slide 9. Hemkop displayed a strong performance in the first quarter and clearly increased its market share, delivering retail sales growth of almost 6%. Growth was primarily driven by an increase in customer traffic and in addition, a higher average ticket value that contributed positively. Like-for-like growth was also strong, contributing to solid earnings performance. With a focus on modernizing stores and enhancing its offering in terms of price value, fresh produce and meal solutions, Hemkop has made excellent progress in recent years. The current growth clearly demonstrates that customers truly appreciate Hemkop. In total, operating profit increased to SEK 114 million, and the operating margin also increased to 5.1%. The increase in operating profit was mainly driven by the increased sales volumes, a stable gross margin development and solid cost control. Earnings in the prior year was impacted by new store establishments.

Turning to Page 10. Our efforts to develop City Gross into a long-term competitive hypermarket chain is proceeding according to plan. City Gross continued to deliver a positive performance in the first quarter with healthy like-for-like growth of 3.6% and a positive earnings trend. Our improvement initiatives to develop the customer offering and streamlining operations are clearly yielding results. City Gross' loss for the quarter amounted to minus SEK 48 million on an adjusted basis, corresponding to an operating margin of minus 2.4%. This was an improvement compared to the prior year, which came from the positive like-for-like growth effects from structural measures as well as efforts to streamline operations.

Similarly to Willys, City Gross went ahead and reduced prices corresponding to the VAT cut 2 days prior to implementation. And together with increased marketing activities, this negatively impacted sales and profitability. On a reported basis, the operating loss amounted to minus SEK 54 million, which corresponds to an operating margin of minus 2.7%. This included the items affecting comparability I mentioned, which refers to structural measures for stores.

We are now on Page 11. Growth for Snabbgross amounted to 1% in the quarter with weak sales development for B2B consumers. The trend in the B2C sales through Snabbgross Club was, however, strong, both in total and like-for-like sales. In terms of the operating profit, Snabbgross managed to offset the weak growth through strict cost control and delivering earnings on par with last year. In total, operating profit amounted to SEK 25 million, corresponding to an operating margin of 2%.

Next, Page #12. Dagab's first quarter net sales increased by almost 4%, driven by sales to food retail customers and especially Axfood's own concepts. Operating profit also increased to SEK 298 million, and the operating margin was unchanged at 1.5%. The performance was primarily due to the sales growth and a lower cost level with increased productivity and logistics. Operating profit was, however, negatively impacted by lower gross margin due to market investments. Late in the quarter, Dagab also negatively was impacted by higher fuel costs and weaker Swedish krona.

That concludes the first part of the presentation. So now it's time for our CFO, Anders, to take you through the financials. And we are now on Page 13, but please go to the next Page #14. And Anders, please go ahead.

Thank you, Simone. During the first quarter, the cash flow was minus SEK 692 million, which was almost SEK 300 million lower compared to last year. The strong operational performance was offset by a negative working capital effect due to inventory build ahead of Easter. This resulted in a somewhat weaker cash flow from operating activities of almost SEK 1.1 billion, SEK 129 million lower compared to last year. The negative cash flow from investment activities of minus SEK 560 million included the initial payment of SEK 185 million for automation in the logistics center in Kungsbacka.

Excluding this automation investment, the capital expenditure in the quarter was in line with last year. By the end of Q1, Axfood utilized approximately SEK 3.1 billion of our credit facilities compared to SEK 3.3 billion in Q1 last year and SEK 2.7 billion as year-end 2025. The cash flow from financing activities of SEK 1.2 billion was in line with last year and included the first dividend payment of just below SEK 1 billion.

We are now on Page 15. The net debt increased compared to year-end 2025 due to dividend payout. The net debt-to-EBITDA was improved compared to Q1 last year due to a strong EBITDA development despite increased leasehold debt. The equity ratio amounted to 17.3%, which was lower than in December 2025 due to the dividend improved. The Q1 equity ratio was, however, 0.5 percentage points higher compared to Q1 2025. Total investments, excluding leasehold and acquisitions amounted to SEK 561 million in Q1 compared to SEK 371 million last year.

During the quarter, we established 4 new group-owned stores, 2 more than last year. Our investments in store establishments have therefore increased during Q1 compared to last year. And as I mentioned before, the investments included the first payment of SEK 185 million connected to automation in the new logistics center in Kungsbacka.

And then let's turn to Page 16. When we look at the capital efficiency, we have a stable development in our rolling 12-month net working capital and also in relation to net sales. Capital employed has increased over the last years, mainly due to the acquisitions of Bergendahls Food and City Gross as well as the investments in Balsta. The level of capital employed, however, decreased slightly during Q1 as equity was reduced not only by dividend paid, but also the dividend to be paid in Q3 later this year. The effect was partly offset by higher leasehold debt. Thanks to an improved earnings trend and the reduced capital employed, ROCE improved by 1 percentage points during the first quarter compared to year-end 2025.

And by that, Simone, I have come to the end of my presentation and hand over to you again.

Thank you, Anders. And we are now on Page 17, and it's time for me to give you an update on our strategic agenda and priorities. So let us turn to Page 18. We have a clear house of brand strategy in our group, and this makes us unique in Swedish food retail. We aim to deliver the strongest customer experiences, and we are present in all segments of the market with our different concepts.

Please turn to next Page #19. To create the right conditions for our retail concepts to be able to succeed on the market, we leverage our strengths as a group and focus on 6 strategic development areas. We have shown you this before, and I would now like to go through some recent key strategic developments.

So please turn to next Page 20. Our ambition is to provide the most attractive assortment on the market with a distinctive offering on branded as well as private label products to meet customers' diverse needs and preferences. During the first quarter, we had a high pace in developing our private label portfolio and launched more than 100 new products. We had product launches across many categories, but I would like to highlight our focus on expanding range of our international assortment.

In addition, we expanded the Mevolution brand to strengthen our offering in personal care. Our private labels represent quality and innovation, and we also focus a lot on sustainability and health with a wide selection of sustainability labeled and organic products. In addition, we have a large selection of products with Swedish origin with more than 400 products under the Garant brand. In the space of sustainability and health, we have previously launched several innovative hybrid products.

And this quarter, we launched ready-made meatballs made from a combination of minced meat, vegetables and legumes, an exciting launch that really can contribute to better eating habits, not least among younger people. Our private labels, including the Garant and Eldorado brands are a significant competitive edge. And with all the new products, we complement our existing portfolio and improve the offerings within our various concepts. So overall, our private label share of sales increased in the quarter and amounted to just over 32%, driven by high penetration in Hemkop and City Gross.

We are now on Page 21. We will continue to develop our attractive store network in the coming years by accelerating the pace of expansion while maintaining a high rate of modernization of existing stores. This work creates new growth opportunities by ensuring that our concepts provide the best possible store experience for their customers. Willys focuses on significantly expanding its presence, but at the same time, the chain gradually rolls out its most recent store concept, 5.0. Hemkop is maintaining a high pace in modernizing the stores and in addition, expands its presence when it sees good potential to do so.

For City Gross, focus in the past year has been on closing underperforming stores with 1 store closure in the first quarter this year and 1 planned for the second. This is really about creating a healthy core in City Gross' store base from which the chain can grow from. That said, City Gross has also established a new store recently in February in Norrtalje. Lastly, to create better conditions for both the restaurant trade and the convenience trade to achieve long-term growth with improved profitability, we have made the decision to bring the 2 operations together into a single organization.

The convenience trade business, which is currently part of Dagab, will be transferred to Snabbgross as of January next year. The logistics operation will, however, remain in Dagab. With consolidation opportunities are being created to further strengthen the customer meetings and offerings, both for restaurants and convenience trade customers.

Moving on to Page 22. We are also improving our competitiveness by maintaining a clear focus on efficiency and productivity. We are enhancing the way we work, increasing use of data and AI in all our processes. More than 100 AI models have been taken into production in recent years, and we focus a lot on developing and empowering employees through AI tools and training and assistance. We are also further optimizing our new logistics structure. And during the quarter, we completed the rollout of a new order and purchasing system that will further strengthen our supply chain.

With this new system, we can be more accurate in forecasts and planning and really strengthen how we manage our order flows to balance supply and demand. As previously communicated, we plan to establish a new highly automated logistics center in Kungsbacka that will be completed in 2030 and ensure increased capacity and efficiency for future growth in Southern Sweden. During the first quarter, work continued according to plan with this project, and we will get back to you when the property lease contract is entered into.

Now let's turn to Page 23. Sustainability is an integral part of our operations and strategies. We aim to be a positive force in society and to take the lead in promoting a sustainable food system by influencing decision-makers, leading the way through own initiatives and driving industry issues. Last year, we completed the transition to renewable fuels and electricity, both in our own and procured transports, a truly important achievement. And consequently, we have seen a significant decrease in emissions.

Using comparable emissions factors, emission from own transport decreased 15% in the first quarter compared to the prior year. In addition to the increased use of renewable fuels, this reduction was due to a higher number of electrical vehicles and route optimization. Diversity and inclusion are also areas that are of great importance to us. And by 2030, we aim to be Sweden's most inclusive food company. During the quarter, we concluded the first work placements under so-called SAO program at Willys and Hemkop. This program aims to help young people in vulnerable areas to strengthen their position in the labor market and motivate them to study. We have been a part of this initiative since the start, and we will be offering more young people jobs in the future as the program is developed and scaled up.

Lastly, I want to highlight our efforts to promote sustainable food consumption. Hemkop is the leading -- industry leader with regards on organic products and helps customers to shop more sustainably. Recently, an independent survey showed that Hemkop leads the market in terms of promoting organic food through campaigns. Willys is also doing a lot in this area and came out second in the survey. In a market where price awareness among consumers remains high, campaigns are important. And I think this really shows that we continue to push forward and take our responsibility.

Moving on from our strategic agenda, and we are now on Page 24. Our outlook for the year is unchanged, and it covers investments, new store establishments and items affecting comparability. With regards to the new establishments, as Anders talked about, in total, we opened up 4 new group-owned stores in the quarter, of which 2 Willys, 1 Hemkop and the new City Gross store I mentioned earlier.

So please now turn to Page 25. And let me sum up. We summarize a quarter with positive customer traffic, volume growth and increased profitability. We are investing in line with our long-term plan to gain further market share and create the conditions for continued profitable growth.

And that was all for today. So now please turn to Page 26, and I hand over to the operator to open up the line for questions. Thank you.

[Operator Instructions] The next question comes from Magnus Raman from SB1 Markets.

I could start off asking about the temporary negative effects on Willys sales growth from major store refurbishment. Can you help quantify in any way the effects here? Is it correct that it's one store that is closed altogether pending the build of replacing store? And then are there other stores that have a significant amount of store space closed for renovation currently?

No, it is -- as you said, there are some phasing effects, I would say, in the quarter regarding Willys stores. The first thing is that we had a little less new stores and the stores that were opened, opened in the end of the quarter. However, we will have a high pace as we earlier communicated in establishing new Willys stores this year. And the other thing that you said is that we have closed 2 stores for relocating them. So they are closed and they will reopen in new places. And then we also have some large modernizations in large stores that's also affecting the like-for-like growth. So this, in total, have a negative effect in the sales growth in Willys for the quarter.

Great. And these 2 stores that are temporarily closed altogether, have they been closed sort of for the major of the duration of Q1 for the most of that period?

Yes, yes. They closed by the end of the last year for relocating them.

So if these 2 stores would have been in operation, retail sales growth in Willys should have been around 1 percentage point higher. That is fair to assume?

I would say that the phasing in the stores for the Q1, together with that the marketing investment came in the late of the quarter together have a negative effect and make Willys grow a little bit less than we hoped for.

Right. And then I also wanted to ask if there's any way to quantify the cost you have been taking here in terms of having the food VAT 2 days in advance in both Willys and in City Gross. Any help there to quantify? I mean, should we do 2 divided by 90 and then a little bit more because those were more trading-intensive days times 5.4%? Or do you think -- could you help us there with any figure...

The reduction of prices that we made both in Willys and in City Gross and Eurocash 2 days in advance had a negative effect and also increased marketing activities in the quarter -- by the end of the quarter together that we had increased personnel cost since it was a lot of manual work of changing millions of prices in stores. And also, we've had IT development costs during the quarter. And of course, also, as you said, the real effect of reducing the prices.

But is it fair to say also that the sort of short-term top line strengthening effect of this was maybe less than what you had hoped for?

Yes. The purpose of doing that was to strengthen the position for Willys as the leading discounter on a long-term effect and by that leading the price reduction. But as you said, we didn't really -- we didn't get the volumes as we had hoped for. So the sales for Easter came as it normally does from -- in the middle of the week until -- and by the end of the week. So we didn't really got the volumes that we had hoped for.

Understood. So sort of subsidizing the ordinary spending, but not being able to push forward the Easter shopping so to say.

Yes. However, I mean, one large purpose for us was to strengthen the position as a leading discounter. So -- and that is more on a long-term effect regarding the brand. So I mean, Yes.

That was mission accomplished. I understand. All right. And then final one from me here. The effects of the war in the Middle East, you mentioned here in the report that the early -- or late into the quarter, the early effects you've seen on fuel costs and then you acknowledge the currency change, the weakening of the Swedish krona. But you have not seen any negative effects on electricity prices. Is that correct?

We have seen a little bit higher electricity prices, but we work with hedge -- we hedge the prices. So we have a more sort of long-term effect when it comes to electricity.

Right. And then when thinking about possible inflationary effect on food commodities, is it, in your opinion, even if this is more for the farmers maybe, is it fair to assume that the price increase and possible supply squeeze as well of fertilizers, i.e., the urea prices, that, that would mainly have an effect on next year's crops rather than this year's crop season?

It's -- I mean, if you look on the direct effects on the fuel cost, that will have -- it, of course, depends on how the development will be going on forward in the Middle East. Regarding the fertilizers, it also depends a lot on the development going on forward. This summer's crops, of course, are already done, but then you have the autumn crops and also going for next year. So depending on how the development will be, there will be some delays, but there could be effects also in this autumn since we do -- you have crops not only once a year.

The next question comes from Daniel Schmidt from Danske Bank.

Just coming back to sort of you start out saying that sort of the recent months have brought increased uncertainty, and we can all sort of acknowledge that and that the focus on value for money is still very high. And I hear you when you say that you didn't get the volumes that you expected when it came to the price cuts that you made a couple of days before the 1st of April. But sort of this uncertainty in itself, wouldn't that sort of have been a tailwind for especially Willys in the quarter since early March that you didn't expect before we went into this conflict in the Middle East?

And I was just wondering sort of why are you growing slower than the market? And I hear you in terms of refurbishments and all that, but you do have more stores now than you had last year. And sort of what is the dynamics? What sort of happened in the market in Q1, you think? Or is it just sort of these things that you mentioned in terms of refurbishments and closed -- temporary closed stores?

Those -- I'll try to give you an answer. I mean if we look upon the first quarter, as the market as a whole, we had a good growth in the market that was primarily coming from volumes since the inflation was low and also we had deflation in March. By that, also, as you said, the activity level in the quarter also increased. And in that environment, we also had the phasing of refurbishments going on, closing down 2 stores. The new stores that we opened up came in late in the quarter, together with the VAT or our price reduction that we made, that together made us go a little bit lower than we had hoped for. So that was all.

And then I would say that the cost levels for the customers, it will, of course, depend a lot on what is happening going forward. I mean the increased fuels came later in the quarter and also -- so I mean, there are many things that is happening for the consumers in the quarter, but also in the market. However, I would like to zoom out a little bit and say like Willys has a really strong position. It's one of Sweden's strongest food retailer. They are the most recommended chain. And we will continue to have a high expansion pace for Willys since we see there's a great potential to accelerate our expansions in Willys.

Yes. Okay. But do you see that sort of these issues that we've talked about now, have they corrected themselves as we go into the second quarter of this year and you had the lowering of the VAT and all that is basically behind us now. Are you seeing a better market on the back of the lowering of the VAT? Or is that still too early to call?

I think it's too early. There is still uncertainties. There are -- the VAT and the initiatives to strengthen the consumers' buying power are, of course, positive. On the other hand, also consumers have high prices for electricity and also fuels, how the increased buying power, how large that will, by the end of the day, become and also how the consumers will use their consumption, it's difficult, and it's a little bit too early to say anything actually about that.

Yes. Okay. And just the last one on the cost for the repricing. Was all that taken in Q1? Or is there anything taken in Q2, early Q2 for Hemkop?

For Hemkop?

Given that they didn't do the changes 2 days before.

Yes. Do you mean the cost for personnel and marketing and so on?

Exactly. Exactly [indiscernible] repricing.

Yes, that was taken for Hemkop -- all the chains were taking in the first quarter. I mean, both marketing, personnel costs, yes.

Okay. And just the fact that you have to reprice the entire assortment, is that sort of -- is that resulting in a number that you want to share in terms of extra staff to just get that done?

Extra -- could you please...

Staff. Staff.

Extra staff. Okay. No, we don't give any details about that. But as you say, there were a large cost, of course, for personnel to doing the job and also marketing and also the price reduction by itself.

The next question comes from Erik Sandstedt from Kepler Cheuvreux.

Erik Sandstedt here with Kepler. Three questions, please. The first one is a follow-up on one of the earlier questions here. Because you say that gross margins at Willys were stable in the quarter, right? And given these pre-VAT price reductions, which I assume had a slight negative impact on gross margins. Can you just explain then what sort of supported gross margins to offset that impact? And given that gross margins were stable and the EBIT margin were down, I suppose OpEx to sales then must have driven that margin contraction. I know it's not a big margin decline, but I'm just trying to understand the underlying drivers a bit better here.

Yes. So the offset was according to, as we said in the report that the marketing investment came in the later part of the quarter. And that also, on the other hand, had marketing cost and cost of personnel that made the margin a little bit softer.

Yes. But there must have been some positive gross margin impacts as well then if the pre-VAT reductions had a negative impact.

Yes. And that was because that the marketing investment came late in the quarter.

Okay. But marketing, is that -- that's an OpEx, right?

It could be both. It could be marketing costs, but it could also be price reduction campaigns.

Okay. Okay. You're talking about price campaign. Yes. Okay. That makes sense. Perfect. Then secondly, if input costs now go up on the back of the geopolitical tensions, will it be tougher to pass that sort of underlying price inflation on given the price competition we're seeing in the market presently?

I mean increasing costs, of course, there are some, how is it time -- there's a [ lead ] time from when they appear until you can see it in the stores. And you haven't seen them in the stores. And also that depends on development going on further. But if the development continues with increased costs, you will, of course -- we are a low-margin industry. And if that will continue, you will see it in the stores also. But it also depends on how the -- yes, how the situation will develop from now. And also, it's difficult to assess what the long-term effect. But I mean, as we wrote the first -- in the end of the quarter, we saw increased costs for fuels. And there also the war affects the fertilizers and that also affects I mean, the entire food industry, it could be both animal production, but also from all the crops. So we will see how that will assess the effect in short and long term.

Yes. But maybe to frame it differently, do you see the market being more price competitive now than, let's say, just a few quarters ago or a couple of years ago?

Yes. We've seen a high competition in the market. I mean, for the last 18 months, there's been a really, really -- or forever, but I mean, the increased competition for the last 2 years, I would say. And that's also why I'm so happy that we can see that the effects we're doing on cost control, also the efficiency that we're seeing coming from the investments that were made both in Balsta and logistics structure, but also now we have implemented a new buying and forecasting system that will also help us to become more efficient. And also, of course, the help of AI and data helps us to be more efficient and also help improve our customer meetings.

Okay. And then just finally, in terms of joint group costs, they were higher both versus the same period last year as well as versus Q4, but you have done some cost initiatives on that line, I think. So what drove the costs here? And what's a normalized level going forward?

Yes. As you mentioned, I mean, it can vary from quarter-to-quarter. We have seen that in the past as well. And now we have, in this quarter, a little bit higher level, and that is due to a couple of projects that we have done in -- for the whole group and that we have taken now. So a little bit high this quarter. And I would say it's more fair to look at the first quarter last year, if you want to have a decent level of the joint group costs.

The next question comes from Fredrik Ivarsson from ABG.

Two questions from my side, and sorry if you have to repeat yourself. I came in a bit late in the call. But first, if you could say anything about the consumer behavior since the VAT reductions. Have you seen any changes to, let's call it, shopping patterns so far?

It's -- yes, it's a little bit early to say that since we have also effects from Easter moving within the month. So it's too early, I would say. There's still -- there's only a couple of weeks going in with the lower VAT. And also there, as we talked a lot about today, there are other -- there's a turbulent environment around our consumers with the war going on in the Middle East and increased cost for fuels and energy. So it's too early to say what effects that will have on the consumers.

Will the increased buying power, how large will that be? They are important measures that have been taken with the lowering on the VAT, but how much will that by the end of the day, when the increase of fuels and increase of energy on our consumers have and will they buy more food, will they buy a new sofa or will they save more money? It's really too early actually to say that. We see that the price value is really important and that the focus on price and price worthiness is important for the consumers. And here, we are really well positioned with Willys, who choose to clarify its position by going 2 days in advance with the price reductions and also City Gross that has strengthened its price worthiness and also Hemkop the last couple of years.

Okay. And second one, if you could say anything about the monthly performance in Willys, did you see January, February being more in line with the market and then somewhat weaker in March? And where I'm getting at is that historically, we've seen the market leader performing better than the competition during Easter due to, I guess, its locations of its store network and so on.

I would say that the phasing of the stores that they came lately in the quarter and also that we made the price reduction that had an effect. But as we also know, Willys has a really, really strong position, but we have also had natural a little bit extra positive effects during the years of high inflation. And also last year, in the first 6 months, we had a high inflation. So we got a little bit extra, of course, growth and that when you look upon the comparison figures -- that was difficult to say, comparison figures that also, of course, have an effect in -- if you look on Willys growth for the first quarter.

[Operator Instructions] The next question comes from Rob Joyce from BNP Paribas.

Just a couple from me. Just the first one, have we seen any changes in your relative price positions since the VAT cut came in? I mean, have any of your competitors gone and cut prices lower or even less? So has there been any change there? And has that marketing spend or noise in the market died down since the beginning of April? That's the first one.

Yes. We do not comment our pricing strategies and the price gaps. For us, it's always important to be clear with the price position, of course, for Willys as the market leader in discounting. And also, it's important for all our chains to have an attractive price position. I mean -- and since the entire -- the VAT, it was the same for all the -- say, all the actors -- not actors, all the chains in the market. That was -- I mean, that was relatively the same for all the players in the market.

And in terms of marketing spends that you saw yourself were elevated, I guess, the whole market picked up at the end of the quarter. Has that died down as the second quarter started or is it still high?

Could you please repeat? I didn't really understand.

So you pushed marketing spend higher into the end of the quarter behind the new prices. I'm guessing the whole market did as well. Have you -- firstly, have you pulled your spend back since then? And has the market done the same? Or has the market pulled back on spend?

We only commented, I mean, the first quarter. And as I said, the entire market had a really high activity level in the -- by the end of the quarter regarding to the Easter, but also for the VAT reduction. What we did that we also went ahead with the price reduction 2 days in advance for City Gross Willys and also Eurocash. So we made some extra marketing investments due to that.

Okay. And I guess the second question I have is just maybe a bit more theoretical, but I guess Hemkop and City Gross, which would be your higher-priced chains seem to have traded better in the quarter on a like-for-like basis as inflation fell. Is there any concern that Willys may see a continuation of the kind of underperformance as prices fall further with the VAT reduction?

I would say if we start with Hemkop, Hemkop's result is the result of a job that's been made for many years now in modernizing stores. We've had some really good modernization done in the last month. Also a job in improving both the price position, but also improving the assortment and focus on meal solution and fresh produce. So Hemkop is the result of a long-term job that's been made, and we're really happy about the performance they made in the quarter. City Gross is also a result of the job that we made a couple of months -- for a couple of months now since we made the acquisition 1.5 years ago. And so we continue to see a positive growth in City Gross.

Willys still have a really strong position and has been growing for many years, no matter what economy we're in, both in good economies and bad economies. But with that said, also, Willys have had some extra push during the high inflation. We had high inflation in 2023. And also last year in the first 6 months, we had high inflation. So I mean, I think, and we see still a high focus on price and price value. I don't think that, that behavior will -- I think that behavior will last. And in that, Willys has a really, really strong position also going forward. And on top, we have a pretty low discounter share in Sweden. So there's a great potential to continue to grow Willys.

There are no more questions at this time. So I hand the conference back to the speakers for closing comments.

So by that, I would like to thank you all for joining today and all the questions, and I wish you a good end of the day. Thank you very much.

Good morning. This is the Axfood Year-End Report 2025 Telephone Conference. And with me today are Simone Margulies, President and CEO; and Anders Lexmon, CFO. In the Investors section of our axfood.com website, you will find the presentation material for today's call. We encourage you to have that presentation at hand as you listen to our prepared commentary. After the presentation, we will be taking questions. A recording of this call will be made available on our website.

So with that, I will now hand over the words to Simone. So please go to 2. Go ahead, Simone.

Thank you, Alex, and good morning, everyone. We report another quarter of above market growth and stronger market positions for all our retail sales. By leveraging the strength of our business concept, we are also preparing for the future and investing in strategically important areas to continue attracting more customers, become even more efficient and strengthen our competitiveness. On this slide, you see some highlights for the quarter, highlights which we will cover during the course of this presentation.

Turning to Page 3. So now as usual, I will start with a brief market overview and the review of the quarterly development. Let's go to Page 4. Market conditions in Swedish food retail continued to be characterized by a high activity level in the quarter with intense competition and continued high price awareness among consumers. Overall market growth amounted to 4.5%. Statistics Sweden reported that the annualized rate for food price inflation was 3.5%. This level was somewhat lower on a sequential basis and in absolute terms, the overall price level was quite stable.

Growth in Axfood's retail sales amounted to 8.7% and 5.3% excluding City Gross. Our growth was thereby once again above the rate of the market, both including and excluding City Gross. Volume growth from increased customer traffic, strong customer loyalty and new store establishments contributed to the development. We have a long history of market share gains. With the Q4 performance, we have outperformed the market every quarter this year and are reporting our 11th consecutive year of market share gains.

We are now on Page 5. Consolidated net sales for Axfood grew 4.4% in the quarter with higher volumes and positive trend in like-for-like sales in all our retail chains. We acquired City Gross in November 2024. So during the fourth quarter, we started annualizing their performance. However, only 2 months of the quarter, which is clear when you took -- look at their comparison figures.

So please go to the next page, #6. Group operating profit increased to SEK 860 million, and the operating margin was higher at 3.8%. Operating profit included items affecting comparability of minus SEK 13 million related to City Gross. Last year, items affecting comparability pertained to a reevaluation of our previous minority stake in City Gross. Operating profit and margin on an adjusted basis, which excluded items affecting comparability, also increased. Adjusted operating profit was SEK 873 million and the adjusted operating margin amounted to 3.8%. The improved profitability was primarily driven by high sales volumes and good growth in both total and like-for-like sales, a stable gross margin trend and effective cost control.

In 2025, we increased our focus on productivity and costs and implemented measures to improve efficiency within and between the group support functions. In the fourth quarter, we saw some effects from these measures through cost savings, not only in the various businesses, but also in joint group functions, which partly explains the positive profit development there.

Let's now turn to Willys and Page 7. Willys continued to outperform the market in the fourth quarter. Growth primarily came from higher volumes as a result of an increased number of customer visits and new store establishments. Willys continues to attract new members into its customer loyalty program, Willys Plus, and see strong loyalty among its customers. Earnings grew to SEK 467 million, which corresponded to a stable operating margin of 3.7%. The increase in operating profit was primarily driven by the increased sales volumes, a stable gross margin development and good cost control.

Moving on to Hemkop and Page 8. Hemkop's retail sales growth in the quarter exceeded that of the market. Hemkop saw volume growth driven by increase in customer traffic and in addition, a higher average ticket value impacted the sales development positively. Operating profit was higher at SEK 78 million, and the operating margin also increased to 3.5%. The increase in operating profit was mainly driven by the increased sales, a somewhat high gross margin and solid cost control. Earnings in the prior year was impacted by new store establishments.

Turning to Page 9. City Gross demonstrated a positive performance during the fourth quarter. The financial comparison figures here obviously refer to the 2 months period November to December 2024. However, to give you a better understanding of City Gross' underlying sales performance, sales growth numbers are calculated with the full October to December period 2024 in the comparison base. While total growth was impacted by store closures, like-for-like growth was solid and amounted to 3%. City Gross reported a profit for the quarter of SEK 28 million on an adjusted basis, corresponding to an operating margin of 1.2% with positive contribution from its like-for-like growth.

In addition, structure measures and efforts to streamline operations contributed to the development. As a reminder, the fourth quarter is generally a strong quarter for hypermarkets. On a reported basis, operating profit amounted to SEK 14 million, which corresponds to an operating margin of 0.6%. This included the items affecting comparability I just mentioned, which refers to structural measures, including discontinuation costs for stores and sales clearance within the nonfood assortment.

Turning to Slide 10. Our restaurant wholesaler, Snabbgross delivered growth of 6% in the quarter on both a total and like-for-like basis. Higher volumes through increased customer traffic had a positive impact on sales in addition to higher ticket -- average ticket value. In terms of profitability, the quarterly development was weak. Operating profit amounted to SEK 35 million, corresponding to an operating margin of 2.5%. A lower gross margin associated with temporary market investment was not fully offset by volume growth, which had a negative impact on the earnings development in a very competitive market.

Next, Page #11. During the year, Dagab has developed the group's assortment of affordable, good and sustainable food with a continued focus in the fourth quarter on ensuring that our chains can provide Swedish customers with a competitive offering. Dagab's fourth quarter net sales increased by almost 5%, driven by sales to Axfood's own concepts. Operating profit amounted to SEK 314 million and the operating margin was 1.5%. Operating profit was negatively impacted by a lower gross margin due to market investments and negative mix effects.

The logistics center in Balsta, along with the high-bay warehouse in Backa and automation of fruit and vegetable warehouse in Landskrona has significantly increased Dagab's capacity and efficiency in logistics. Work continues to optimizing our new logistics structure. And later on in the presentation, I will come back to the next significant investment in our logistics structure, the facility in Kungsbacka that we plan to establish to increase capacity and efficiency also in the southern parts of Sweden.

But before that, it's time for our CFO, Anders, to take you through the financials. We are now on Page 12, but please let's go to the next page, #13. And Anders, please go ahead.

Thank you, Simone. Net sales for the group increased by 6.1% to approximately SEK 89 billion. Including City Gross, retail sales increased by 16.4%. And excluding City Gross, the increase was 5.9%, which was higher than the food retail market in total, where growth amounted to 4.5%. Operating profit, excluding items affecting comparability, increased 7.4% to almost SEK 3.7 billion. The operating margin, excluding items affecting comparability, remains unchanged at 4.1%, where the City Gross acquisition impacted the margin with minus 0.2%.

Then please turn to Page #14. During 2025, the cash flow was SEK 345 million, which was almost SEK 300 million higher compared to last year. We saw strong underlying operating cash flow from both for the fourth quarter and the full year, mainly due to a strong operational performance boosted by positive working capital changes. Last year was impacted by negative calendar effects in working capital. The negative cash flow from investment activities of SEK 1.7 billion was substantially lower than last year as last year was impacted by the City Gross acquisition.

Excluding the City Gross effect, we have a higher pace in investments in our retail operations and a lower pace in automation investments compared to last year since we now are through with our investment in the Balsta logistics center. By year-end, Axfood utilized approximately SEK 2.7 billion of our credit facilities compared to SEK 3.1 billion by the end of Q3 and SEK 2.9 billion at year-end 2024.

We are now on Page 15. During the last couple of quarters, we have seen a positive trend in the net debt development. The net debt increased with the acquisition of City Gross in Q4 last year and the dividend paid in March, but is now below 2 and excluding IFRS 16, just below 0.5. The equity ratio amounted to 21.2%, which was higher than last year and above the year-end target of 20%. Total investments, excluding leasehold and acquisition amounted to SEK 1.7 billion. In 2025, during the year, we established 9 new group-owned stores, 3 fewer stores compared to the previous year. Our investments in store modernizations have increased compared to last year.

Please then turn to next page, Page #16. When we look at the capital efficiency, we had a negative development of our rolling 12-month net working capital. The impact of the City Gross acquisition has increased the KPI with approximately 0.3 percentage points on a rolling 12-month basis, which implies a positive underlying development. Capital employed has increased over the last years, mainly due to the acquisitions of Bergendahls Food and City Gross as well as the investments in Balsta. The level of capital employed increased slightly during 2025, mainly as a result of increased leasehold debt and equity. Due to the increase in capital employed, the return on capital employed decreased to 15.5% compared to last year despite an improved operating profit.

And thereby, I have come to the end of my presentation and hand over to you again, Simone.

Thank you, Anders. We are now on Page 17, and it's time for me to give you an update on our strategic agenda and priorities. So let's turn to Page 18. We have a clear house of brand strategy in our group, and it makes us unique in the Swedish food retail. We aim to deliver the strongest customer experiences, and we are present in all market segments with our different concepts.

Our largest brands, Willys, Hemkop and City Gross made significant progress during the past year. With a clear focus on always delivering Sweden's cheapest bag of groceries, Willys once again took market share, increased its earnings and continue to expand with new store establishments. Willys has had a strong momentum for a long time and has excellent potential to reach even more customers. The aim is to open at least 10 new stores for Willys annually in the coming years by also continuously creating an even better customer experience in stores through continuous upgrades to its new store concept, Willys point 0 -- 5.0, sorry.

Hemkop also gained market share during the year while improving its profitability. This was achieved through a high pace of store modernization and continuous development, focused on price value, sustainability, fresh products and meal solutions. For City Gross, it was a year of transformation with a series of improvement initiatives in many areas. Important steps forward were made, resulting in improved like-for-like sales growth, a lower cost level and positive earnings trend. We continue to work according to plan to strengthen the chain for the future to become a truly competitive player in the hypermarket segment with the aim to achieve profitability at some point during the second half of 2026.

We are now on Page 19. To create the right conditions for our retail concepts to be able to succeed on the market, we leverage our strength as a group and focus on 6 strategic development areas. We elaborated these during the Capital Markets Day in September, and I would now like to go through some of our most important strategic priorities within these going forward.

So please turn to Page 20. We strive to offer the market's most attractive assortment, a highly relevant offering that makes affordable, good and sustainable food available to everyone. This works includes both branded products and private labels, but now I will focus more on the latter. Because our extensive range, including the Garant and Eldorado brands, is a significant competitive edge. These products contribute to profitable growth by creating an attractive and distinctive assortment that strengthens the offerings within our various concepts.

Our products represent quality and innovation, and we focus a lot on sustainability and health with a wide selection of sustainability label and organic products. In addition, we have a large selection of products with Swedish origin with more than 400 products under the Garant brand. During 2025, we continue to develop our private label offering and launched approximately 270 new products. Our total private label share of sales was diluted by City Gross and that has a lower private label share than Willys and Hemkop. The private label share continued to increase in each chain, a trend that we've seen for a long time. And in particular, now we see a strong growth also in City Gross.

We are now on Page 21. We have an attractive store network, a network that we will continue to develop in the coming years by accelerating the pace of expansion while maintaining a high rate of modernization of existing stores. During 2025, we established 9 new group-owned stores. On a net basis, we have thereby expanded our network of group-owned stores with more than 100 in the last 10 years. And we aim to continue on this path also going forward. In addition to store establishments, we have continued to modernize and refurbish existing stores in a high pace. This is really about creating inspiring store environments and great experiences to drive customer traffic and profitable growth.

Looking at major refurbishments from 2021, sales from these stores increased significantly more than the market and operating profit also increased. I also want to elaborate on how our house of brand strategy creates flexibility and opportunities in terms of our store presence. We can maximize the opportunity on each local marketplace by having the right concept in the right place. Last year, we converted 2 City Gross stores to Willys because we saw a better opportunity for Willys to be successful in those areas. These conversions have proven to be highly successful as both stores have experienced a substantial sales increase following the conversion.

Adjusted for inflation, sales in the Bromma Blocks store in Stockholm was more than 50% higher during the September to December period last year compared to the same period the year earlier when the store was operating under the City Gross brand. And the corresponding increase for the Borlange store was more than 70% during the November to December. This really highlights the strength of our house of brand strategy and how we can leverage our strong portfolio of concepts.

Next page, #22. Last year, we communicated that we are planning to establish a new highly automated logistics center in Kungsbacka to strengthen our supply chain in Southern Sweden. During the fourth quarter, we signed the agreement for the automation equipment with Witron, a market-leading dynamic warehouse and order picking systems. We have collaborated with Witron for several years as they have been our supplier of the automation solution in Balsta. The total contracted investment will amount to EUR 265 million during the period 2026 to 2031.

On this slide, you can see how the investment undertaking is spread out in the next couple of years, which we communicated just over a month ago. The amount for 2026 is included in our CapEx guidance that I will provide you with shortly. We are continuing to build for the future, and this new logistics structure will create capacity for us to continue to grow and become even more competitive.

We are now on Page 23. At Axfood, we have a highly ambitious agenda when it comes to sustainability and health. These are integral parts of our operations, and our scope is the entire food supply chain. During the fourth quarter, we reached a significant milestone as we completed our transition to fossil-free transports, both in our own operations and in procured transports. This is truly a great achievement, and I'm proud that we, as a group, have chosen to take a lead this way to reduce emissions.

We now exclusively use renewable fuels or electricity, and we also have target to electrify 50% of our own transport fleet by 2030. Now while the impact on emissions from transition is not fully reflected in our numbers for the year, emissions from transports nevertheless went down substantially in 2025. And looking at the last 5 years period, transport emissions have decreased with approximately 70%.

Another highlight during the quarter was that we applied to have 3 climate targets validated by the science-based target initiatives, and we are now on Page 24 in the presentation. We have been working on this for some time now, as you may know. For us, it is, of course, important that goals and ambitions are worked thoroughly through thoroughly. And during the process, we identified a need to develop and improve our existing climate reporting, mostly regarding Scope 3.

This work now enable us to better establish a transition plan to show how we will reduce emissions in the long term. We commit to reduce emissions in our operations by at least 70% by 2030 compared to 2024, to have at least 70% of our suppliers set science-based climate targets by 2030, the latest, and to reduce flag emissions by at least 30% by 2030 compared with the base year 2024. Our application will now be revised by the SBTi, and we will come back to you when we have our targets validated.

Please turn to the next page, #25. Today, we're issuing the outlook for 2026. We are continuing to invest in our business to strengthen competitiveness and create value for all our stakeholders. Investments are expected to amount to SEK 2.2 billion to SEK 2.3 billion, excluding acquisitions and right-of-use assets. The largest part of this is related to recurring investments in our operations and it also covers expansion through new stores. However, the amount also includes SEK 470 million automation investments for our future logistics center in Kungsbacka, as I just mentioned.

To encourage even more customers to shop with us, we will continue to maintain a high rate of new store establishments in 2026 and beyond. Our ambition this year is to expand the store network by 10 to 15 new group-owned stores in 2026. In addition, we want to continue attracting franchisees and add new retailer-owned stores to expand our total store base. To further strengthen City Gross, we will incur SEK 50 million in structural costs in that business in 2026, which will be classified as items affecting comparability. These costs are mainly related to its store base.

Moving on to the dividend on Page 26. Axfood has a strong financial position, and the Board of Directors will propose to the Annual General Meeting an increased dividend of SEK 9 per share. The dividend will be split into 2 payments, SEK 4.50 per share in March and SEK 4.50 per share in September. The dividend proposal corresponds to 83% of profit after tax, well in line with our dividend policy.

Now turning to the final page of this presentation, Page 27. So let me sum up. We are summarizing a quarter and year in which we attracted growing numbers of customers with increased loyalty and strong positions in all our market segments. We are well positioned to remain a challenger and feel confident about the year ahead. We operate in dynamic markets that continue to be dominated by a strong focus on price value, and our aim is to continue to grow more than the market. That is because we have a strong business model and structure that create opportunities and competitive advantages.

For us, the key to drive long-term growth and profitability is based on customer traffic, loyalty and volume growth. We have seen a strong development in all these areas over a long period also in 2025. Based on our great commitment and passion for food throughout the organization, we are leveraging the strength of our business model. And that was all for today.

So now please turn to Page 28, and I hand over to the operator to open up the line for questions. Thank you.

[Operator Instructions] The next question comes from Magnus Raman from SB1 Markets.

I think I would like to start asking about City Gross, where we now see, if you look at the second half of '25 in total, it's a rather clear profitability that you reach H2 '25 on an adjusted EBIT basis. Could you elaborate a little bit on this in comparison to the target you set out to reach breakeven H2 '26. Should we view it that you have already achieved this target now 1 year earlier? Or is it a very big seasonality difference here that lead us to -- that you want to highlight when we look at H1 '26?

Yes. Thank you very much. Within City Gross, we are in a transition, as you know. We are doing -- we're in the middle of our transformation plan and to do the turnaround. And our aim is to create a really strong core and to create a strong and competitive player within the hypermarket segment. And this is -- it comprises a lot of different initiatives, everything from the operating model to the store concept to the customer offering. We also made things -- restructuring the organization, et cetera.

We're also investing in price. And within the fourth quarter, there are seasonal effects for the hypermarket segment that are in general stronger in the fourth quarter. However, we are taking really, really good steps within City Gross. But as you understand, we are in the middle of a journey, and it can go up and it can go down. And we are reiterating that in the second half of this year, we will create an attractive and profitable player within the hypermarket segment. So we are reiterating that goal.

All right. Just another thing here on the like-for-like sales growth for City Gross. And forgive me if you've already mentioned this earlier in the presentation, I came in a bit later here, but you state in the table 1.5% like-for-like sales growth. And I assume that, that relates only to the November to December period. Can you say if that is correct? And then in the text, you write October to December, 3.1% like-for-like growth. Do I interpret this correctly? And so in that case, September sales, I assume must have been much stronger?

To start with, yes, you have interpreted correctly. So 3% in the quarter and 1.5% for the November, December period. And that's actually -- as we talked a lot before, that's actually where it all starts. We have to have a positive growth in like-for-like, and that's why we're really, really happy to see that during the quarter.

But considering that, I guess, that in the mix of these months in the normal quarter, I guess, that the last quarters, i.e., November and December must be -- should be larger. Nevertheless, October, I think I said September, I mean, of course, October, October must have been very strong for the full quarter figures to reach 3-plus percent, while the November to December was only 1.5%. Is that correct?

We don't actually guide you monthly, but -- and it's also about how you say what kind of comparison figures you have, of course. I would say that we're really happy that we see the positive like-for-like growth that we've seen now for some time for City Gross. And as I told you, it's a journey, and that's why we're reiterating profitability somewhat in the second half of this year because it's -- and we're doing and taking large measures and initiatives to really create and building this strong core.

And that's why we have to -- you have to look at the trend here because it can -- some months, it can go up and some months it can go down when we're doing so much changes as we do. So for us, it's about looking at the trend and it starts with the like-for-like growth, but we also made a lot of initiatives regarding cost and organizational changes and also operating model and now we're also developing the store concept. So I think it's important to see the trends. And also I think your 2 questions maybe are linked. We're on a journey, it can go up, it can go down since we're doing so much changes in the field.

Right. But the trend, if we look at 2 figures, then the trend in like-for-like sales growth has been very stable because you've been delivering now on full quarters, 3 quarters in a row with above 3% positive like-for-like growth and you delivered 3 quarters on sort of adjusted operating profit level. You delivered 3 quarters in a row with sort of improving results then flat in Q3 and now a clear profit in Q4. So -- but all right thank you for the remarks.

And then I'd like to ask on Dagab. You mentioned here as one explanatory factor to the weaker margin price investments from Dagab in the quarter. And I guess maybe it's been a special quarter to a certain extent, for example, with the PRO survey taking place in this quarter. Can you elaborate if you think or see that there were some temporary factors as it relates to price investments that weighed on Dagab's margin in Q4?

To start with, the PRO doesn't have anything to do with this. And we do, as we always do, to deliver for Willys the cheapest bag grocers in the market and also for Hemkop and City Gross it's important to be highly competitive. So I say PRO doesn't -- we don't take that much measures about PRO. But to start -- but to go to Dagab, in Dagab, we see really good effects of the investments in -- we made in the logistics, both in Balsta, but also the fruit and vegetable in Landskrona and the new high-bay warehouse that we have automated in Backa. However, as we said, we have a negative effect in the margin, and that is due to both market investments, but also mix effects.

And to elaborate a little bit more about mix effects, when we have changes in customer behaviors and also volatility commodity pricing and then that can vary from month-to-month and quarter-by-quarter. And for instance, we have very -- which we are happy to, we have good volume growth within fruit and vegetables, where we also have had deflation, and that has a negative effect in the earnings in Dagab. So I think it's important to see -- look on our result as a group, how we actually play our business model in the most efficient way. And by that, we're once again gaining market shares, the 11th year in a row and also improving our profitability as a group.

Right. But do I interpret you rightly that when you then mention investments, you speak about capital investments that have been capitalized and then leading to a higher depreciation impacting results. Is that what you mean?

No, it's market investment. Dagab is a supporting company for all our customers and their role is to help all the customers to be really competitive in the market and to have the right conditions to take the market development, and that is what we mean with the market investments.

Exactly. That was my feeling. And then that means, of course, market investment means investment into reduced price, I guess, on certain merchandise for the retailers?

Yes, it's to increase the competition.

Yes, yes. And I mean -- so I mean, the quite aggressive price cuts that you took on several items in conjunction with PRO survey must have been impacting profitability somewhere in the chain, either in Willys or in Dagab or both. Isn't that correct?

I have to start -- I mean, I don't like to talk about the PRO. I think Willys has handled those questions. I mean, Willys -- there are so many methodological errors in that survey. So we don't actually take that much action about that. For us, I think it's important to put our performance in the perspective of a high competition in the market from all the players. And I think that we are navigating that quite successfully since we're gaining market share. We have a high competition in the market, and we also have a consumer that is very conscious with a high focus on price and price awareness. And that's the market that we are navigating quite well, I would say, since we're gaining market share and strengthen our positions with all our brands, our strong brands.

Great. Then on Snabbgross, you had a material setback in profitability in Snabbgross here in the quarter. And you mentioned temporary market investments here. So can you elaborate a little bit on that if perhaps you already did when you ran it through in the presentation, but for a reminder here on Snabbgross.

Yes. Snabbgross made some marketing investment that they didn't really get the ROI on in volumes. They had a good growth with 6%, but it didn't actually -- it wasn't enough to cover the negative effects in the margin and in the profitability. So they made a weak performance for the quarter.

So we should interpret that these will not be repeated, these type of investments then?

As you know, I don't give any forecasts on the segments, but...

No, no, without forecast but speak for itself.

It was not the exact fit. So that way.

Right. Okay. Okay. Great. And then on -- just looking forward then instead or not forward-looking statements, but looking at what we all know about the halving of the food VAT from 1st April. Do you think that this could -- I mean, we've had a period now where we had very high inflationary pressure where we've seen consumers trading down, so to speak, in the mix of what they consume. Do you think that the relief from the half food VAT might impact the mix in the other direction in any way?

To start with, we look -- we are very positive -- we look very positive on the reduction of the VAT. I think we have a consumer that has been very cautious, and we still think that the consumer is cautious, and it's very difficult to make any forecast on how the consumer will act. They are -- I would say they're a little bit scared from the price shocks that we have experienced the last years. And also, we have a pretty high unemployment in Sweden.

So we think the customer is still cautious and focus on price value and value for money. However, we hope that we will get some positive mix effect in the way that we see -- that we're hoping to see more increased, I would say, purchases within sustainability and sustainable label food, but that's what we're hoping for. We think it's difficult to give you a forecast. The customer is still very price conscious, and there is a high competition in the market. So it's difficult to give you any forecast on this.

Right. And just a final one here on the falling international food commodity prices seen now for 4 months straight and also topped by the strengthening Swedish krona a bit, have you seen so far any effect as it related to your sort of dollar purchasing from this?

If you look upon the commodity, we see, as you said, we had higher inflation in the beginning of the year due to dairy, meat and also to coffee, and that was stabilized in the second half of the year. And also with the strengthening of the Swedish currency, of course, it's positive, but more on a longer-term perspective for the consumers, since there's so many things that are affecting the prices. But of course, in the long-term perspective, it's positive for the consumers when we see a more stable development in the commodity pricing and also a strengthening in the Swedish currency.

The next question comes from Rob Joyce from BNP Paribas.

I'll go one by one as well. Just following on from the last one. So in terms of inflation you're seeing in the market, you mentioned deflation in fruit and veg. Are we seeing slowing inflation further as we start 2026?

It's difficult to give any forecast on the pricing since there are so many things that are affecting. We also have a geopolitical situation. We have also, how do you say, the climate changes -- sorry, climate changes is also affecting, but we have had more stable pricing since the summer, I would say. How it will end up in the future, it's very difficult for me to give any forecast on.

But in terms of the first month you've seen, are we seeing prices sort of stable versus December or will they falling slightly further?

I can't give you any forecast on the pricing since there are so many things that are affecting the pricing.

Okay. And then maybe you mentioned competitive intensity of the market. Are you seeing any changes in the more recent months? Has that competitive intensity stepped up any players you'd flag?

I would say we have experienced a very competitive market for the last couple of years, I would say. And there has been a competition from all the competitors, I would say. So we're still in a market with high competition and also a consumer that is very price sensitive and cautious.

Okay. But no real changes?

No, we're pretty much in the same market as we've seen for the couple of years now.

Okay. And then in terms of the VAT cut, is your expectation that, that will be immediately fully passed to consumers?

Yes, definitely. The VAT is the tax, as you know, that the state put on the food. So I mean that is digitally transferred to the consumers.

Okay. Okay. And in terms of historical price elasticities, I mean, I guess we don't have much data on when prices actually fall. But do you have any sort of data which suggests how consumers might react to a 6% fall in prices or 4% -- sorry, 5% probably works out?

No. It's really difficult to know what the customers will do actually since we think it's very positive because the consumer have decreased their economy in the last years and by the lower VAT on food that will increase the buying power for the consumers. How they will act is difficult to forecast since they -- as I told a little bit before, they scarred from the years of high, the cost shock they've had high employment. So if they will save the money or they will buy other things than food or if they will place more money for, it's really difficult to forecast. So we actually don't do any forecast. And it's difficult also if you analyze different markets because it's been different situation in also in these markets.

Okay. Understood. And just looking at the sort of the Dagab numbers now and how that -- I guess you're sharing the savings more broadly across the group. Do you think as we look to the next investment in the supply chain, we should think about that more as a kind of just cost of doing business. You need to make this investment to maintain competitiveness rather than thinking about this as a sort of SEK 300 million, SEK 400 million boost to EBIT, potentially the people that we were thinking about before from the last project?

We will -- we are still negotiating regarding the building, the facility. And when we have everything set, of course, we will come back to you with the full scenario. But for us, it's important both to secure capacity for the southern part of Sweden from 2030 going forward. But also it's about strengthening our competitiveness. And when we will open the warehouse, we will have the same cost level as we have today, of course. But then, of course, we will improve our competitiveness over time.

Okay. And just one more broadly, just thinking about the environment. I know over here in the U.K., when there have been certain cuts on sort of business rates, for example, the grocers in the U.K. didn't really take those to the bottom line. Is there -- what's the political environment about -- if there is a volume increase in grocery, is there room for profitability to improve? Or is it very much focused on driving that consumer experience?

Could you rephrase the question?

Just I guess, with the VAT cut, I mean the sort of the overall environment, when these cuts are given to grocers, the expectation is generally the consumer sees the benefit. And I've said in certain markets we cover as well, we've seen those benefits largely just passed to the consumer. But in terms of the potential volumes increasing on the back of lower prices in food, do we think that gets further invested in the consumer? Or can that drive the bottom line?

Now, I understand. So first of all, as I said, we do not -- it's difficult to make forecast how the consumer will act. But the other part, we have a long-term goal -- target growth for our group set to 4.5%. And that will come from us to continue growing, attracting more customers and also improve our efficiencies within the entire group. So I mean, we're aiming and that's a long-term goal for us to strive towards. But also, I think it's important, if you look upon our figures last year and if you exclude City Gross, we're actually having a margin of 4.3%. So we're heading towards our goal, but it's set on the long term.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So that was all for today. Thank you all for your good questions, and see you in the next quarter.

Good morning, everyone. This is Alexander Bergendorf, Head of Investor Relations at Axfood, and welcome to the Axfood Third Quarter 2025 Telephone Conference. So with me today, I have Simone Margulies, President and CEO; and Anders Lexmon, CFO. In the Investors section of our website, you will find the presentation materials for today's call, and we encourage you to have that presentation at hand as you listen to our prepared commentary. After the presentation, we will be taking questions. And a recording of this call will be made available after the end on our website. So with that, I will now hand over the words to Simone. So please go to Page #2.

Thank you, Alex, and good morning, everyone. Axfood summarizes another strong quarter with high customer traffic, volume growth and increased market share. With increased loyalty and growth in our store chains as well as improved efficiency and solid cost control, earnings increased in all operating segments. In addition, we continue to invest in strategically important areas to become even more efficient and further improve our competitiveness. In recent year, our logistics structure has been developed to enable continued profitable growth. And during the quarter, we announced plans to establish a new highly automated logistics center in Kungsbacka in Southern Sweden. In sustainability, we presented the Food 2030 report, our proposal for a more sustainable food strategy for Sweden. We also continued to phase out fossil fuels in all our transports, had our new solar park in full operations and launched innovative new products focused on sustainability and health.

Following that introduction, let us now turn to Page 3 and the agenda for today's presentation. I will start with a brief market overview, and then I will give you a review of our third quarter performance and some of our strategic priorities. Following that, Anders will take you through the financials. And lastly, the outlook for the full year and a brief summary to conclude for me before we open up for questions.

Turning to Page 4, but let's go straight to Page 5 and take a look at the quarterly development. As in previous quarters, market conditions in Swedish food retail during the third quarter continued to be characterized by intense competition and high price awareness among consumers. Overall market growth amounted to 5.4% and Statistics Sweden reported that the annualized rate for food price inflation was 4.4%. This was somewhat lower than in the second quarter this year. However, in absolute terms, compared to the second quarter, the price development was relatively stable. Axfood is successfully navigating a changing end market dynamic by leveraging the strength of our business model of strong and distinctive concepts working in collaboration. Thanks to affordable and attractive offerings, more and more consumers are choosing to shop with us.

Having maintained our momentum, we delivered a strong performance in the quarter. Growth in our retail sales amounted to almost 20%. Excluding City Gross, which was acquired in November last year, growth amounted to just over 6%. As such, our growth again was above the market rate, both including and excluding City Gross. Volume growth from increased loyalty, customer traffic and new store establishment was the main driver behind this development. In e-commerce, we grew 11%, which compared to the market growth of 8%. Excluding City Gross and the discontinued business Middagsfrid, sales were up 6%.

Turning to Page 6. Consolidated net sales for Axfood grew almost 7% in the quarter, driven by continued strong momentum in Willys, Hemköp and Snabbgross. We also saw a positive trend for City Gross. In all, City Gross net sales amounted to just over SEK 2 billion. However, on a group net sales basis, the contribution from City Gross was SEK 345 million due to internal eliminations in Dagab.

Please go to the next page, #7. Group operating profit increased to just over SEK 1 billion, and the operating margin was stable at 4.8%. Operating profit included items affecting comparability of minus SEK 39 million related to City Gross. Adjusted operating profit, which excludes these items, also increased to SEK 1.1 billion, and adjusted operating margin was higher at 4.9%. In all, the absolute growth in group operating profit was driven by Willys and Dagab. However, Hemköp and Snabbgross also reported increased profits year-on-year with strong growth in percentage terms. So the earnings performance was once again very well balanced this quarter across our operating segments. City Gross had a negative impact on the group's profit development, however, to a less extent than in the previous quarters.

Let's now go deeper into the development in each operating segment, starting with Willys on Page 8. Willys continued to outperform the market in the third quarter with a growth of 6%. Growth primarily came from higher volumes as a result of an increased number of customer visits and new store establishments. A higher average ticket value also had a positive impact on the sales development. Willys is Sweden's most recommended food retail chain and has a unique position on the market. The rate of increase of new members in the Willys Plus loyalty program continued to be on a high level. And in addition, loyalty among existing members remained strong.

Earnings grew and amounted to SEK 587 million, which corresponds to a stable operating margin of 4.9%. The increase in operating profit was primarily driven by the increased sales volumes, a stable gross margin development and good cost control. Leveraging its position as Sweden's leading discount grocery chain as well as its liking among households, Willys is continuing to develop its offering. Among many initiatives, stores are continuously being upgraded to a new Willys 5.0 store concept. Willys 5.0 entails a significant improvement to the customer experience through a substantial upgrade of store layout and design. The assortment is key, and here, the focus is really on enhancing the offering of fresh products.

Willys 5.0 is a scalable concept, which gives flexibility and opportunities to establish more stores. Because establishing new stores, this is exactly what Willys wants to do as the store chain is currently accelerating its expansion pace to reach even more consumers. In October, Willys reached a significant milestone when it opened store number 250 in Rosengåard in Malmö. Over the past 10 years, Willys had expanded store base with more than 50 stores on a net basis. And now the aim is to open at least 10 new stores each year in the coming years.

Moving on to Hemköp and Page 10. Hemköp's retail sales growth of 6% in the quarter exceeded that of the market and like-for-like growth was also strong at almost 5%. Hemköp demonstrated volume growth driven by customer traffic, a higher average ticket value also impacted the sales development positively. Total net sales for Hemköp increased 7%. Operating profit was higher at SEK 103 million and operating margin was 5.1%. The increase in operating profit was mainly driven by the increased sales, a stable gross margin and good cost control.

Turning to Page 11. I just talked about Willys modernizing its store base, and Hemköp is also modernizing stores at a rapid rate in order to enhance the customer meeting. In addition, its offering is continuously being developed with a focus on price value, fresh products and meal solutions. Hemköp's performance in the third quarter was strong, representing a continuation of its momentum for some time now. This development is despite them operating in traditional grocery, which is a segment that while being the largest on the market, has seen its share of the market decline in recent years. It's important to take this into account when analyzing Hemköp. And it is quite clear when you look at the customer data such as development in penetration, in loyalty and purchases, that Hemköp is clearly outperforming their main peers.

We are now on Page 12. We acquired City Gross nearly a year ago to create new growth opportunities for our group. The organization is working according to a clear plan and has a comprehensive development agenda in place to reverse the chain's weak performance in recent years. This year is a transitional year, and we are today reiterating that we expect to reach profitability at some point in the second half of 2026. While total growth for City Gross in the third quarter was impacted by store closures, like-for-like growth amounted to slightly more than 3%. City Gross reported on an operating loss on an adjusted basis of minus SEK 4 million. The loss was less negative than in previous quarters with positive effects from like-for-like growth.

In addition, structural measures and efforts to streamline operations also contributed to the development. On a reported basis, operating profit amounted to minus SEK 43 million, which corresponds to an operating margin of minus 2%. This included items affecting comparability of minus SEK 39 million pertaining to structural measures, including discontinuation costs for the store in Kungens Kurva in Stockholm, organizational changes and sales currents within the nonfood assortment. In August, the new communication concept and the improved more affordable customer offering was further developed. Also, the City Gross store in Borlänge was closed ahead of concept change to Willys.

Turning to Page 13. The 3% growth in like-for-like sales for City Gross represent a positive trend. The chart on this slide shows comparable sales on a rolling 12-month basis, each quarter from the third quarter 2022. As you can see in the chart, after a couple of years with declining sales, City Gross is now back to growth, which, of course, is encouraging. That said, we are still in early days on our journey with City Gross and maintain a high activity level to enable the chain to become a competitive player on the market once again. City Gross has excellent potential as a pure-play hypermarket operator, an attractive segment that is continuing to account for a growing share of the market. With a long-term perspective, we are leveraging our knowledge and experience to develop and strengthen the chain for the future.

Moving to Slide 14. Our restaurant wholesaler, Snabbgross, delivered growth of 6% in the quarter on both a total and like-for-like basis. Higher volumes through increased customer traffic had a positive impact on sales in addition to a higher average ticket value. Operating profit was higher than in the prior year and amounted to SEK 101 million, corresponding to a higher operating margin of 6.3%. The increase was mainly driven by higher sales, a stable gross margin and good cost control.

Next Page #15 and Dagab. Dagab's quarterly net sales increased by 5%, driven by sales to Willys, Hemköp and Snabbgross. Operating profit increased to SEK 341 million, and the operating margin was higher at 1.7%. The performance was primarily due to the sales growth and a lower cost level with increased productivity in logistics. Operating profit was, however, negatively impacted by a lower gross margin. Dagab is continuing its effort to optimize the flow of goods and streamline the group's new logistics structure. The logistics center in Bålsta, the fruit and vegetable warehouse in Landskrona and the recently expanded and automated highway warehouse in Backa, Gothenburg are all contributing to the group's capacity and efficiency.

In addition, and we are now on Page 16, work on establishing a new highly automated logistics center for Southern Sweden has been initiated to ensure increased capacity and efficiency. As previously communicated during the third quarter, letters of intent were signed with our automation partner, Witron and with Kungsbacka Municipality. The logistics center, which will span approximately 90,000 square meters and be environmentally certified, will handle picking and deliveries of goods in all temperature zones to grocery stores. Total capacity is expected to increase at least 20% compared to current volumes in the Southern Sweden. The facility is expected to be put into operation starting in 2030.

Turning to Page 17. Now it's time for Anders to take you through the financials. So please go to the next page, Page #18. And Anders, please go ahead.

Thank you, Simone. During the first 9 months, net sales for the group increased by 6.6% to approximately SEK 66 billion. Including City Gross, retail sales increased by 19.3% and excluding City Gross, the increase was 6%, which was more than the food retail market in total, where growth amounted to 4.5%. Operating profit, excluding items affecting comparability, increased 5.8% to just over SEK 2.8 billion. The operating margin, excluding items affecting comparability, slightly decreased from 4.3% to 4.2%, where the City Gross acquisition impacted the margin with minus 0.3 percentage points.

Next, Page #19. During the third quarter, the cash flow was minus SEK 40 million, which was SEK 380 million higher compared to last year. We saw a strong underlying operating cash flow, both for the third quarter and the 9-month period, mainly due to a less negative contribution from net working capital compared to last year. The negative calendar effect was higher last year. The negative cash flow from investment activities of SEK 421 million in Q3 was somewhat higher compared to last year, but in line with previous quarters. We have a higher pace in our investments in our retail operations and a lower pace in automation investments compared to last year since we now are through with our investment in the fulfillment center in BÃ¥lsta. By the end of the third quarter, Axfood utilized approximately SEK 3.1 billion of the group's credit facilities compared to SEK 2.5 billion by the end of Q2 and SEK 3.2 billion at the end of Q1. The increased utilization compared to Q2 was due to the dividend paid out in September.

And then please turn to Page #20. Net debt has increased since the acquisition of City Gross in Q4 last year. In addition to the loans raised for the acquisition, net debt also has increased with the City Gross leasehold debt of approximately SEK 2 billion. As we communicated in the Q2 report, Axfood has successfully refinanced the existing revolving credit facility in the beginning of Q3. The new RCF amounts to SEK 4 billion, where SEK 1 billion have a tenure of 3 years and SEK 3 billion have a tenure of 5 years. And the conditions in the new agreement are in all essentials unchanged compared with the old facility. The equity ratio amounted to 20.4%, which was lower than December 2024, but above the actual year-end target of 20%. The lower equity ratio compared to Q3 last year was also a result of the City Gross acquisition. Total investments, excluding leasehold and acquisitions for the first 9 months amounted to SEK 1.3 billion. Year-to-date, we have established 7 new group-owned stores, the same number as in the prior year. We have, however, increased our store modernization rate compared to last year.

And then please turn to Page #21. When we look at the capital efficiency, we have a negative development of our rolling 12-month net working capital as a percentage of sales. As I have mentioned before, the impact of City Gross acquisition is expected to increase this KPI with approximately 0.3 percentage points on a rolling 12 months' basis. Capital employed has increased over the last years, mainly due to both the acquisition of Bergendahls Food and City Gross as well as the investments in BÃ¥lsta. The level of capital employed increased slightly during the first 9 months, mainly as a result of increased leasehold debt and utilization of credit facility. Due to the increase in capital employed, return on capital employed decreased somewhat compared to last year to 16.4%. And thereby, I have come to the end of my presentation, and I hand over to you again, Simone.

Thank you, Anders. We are now on Page 22, but let's go straight to Page 23. While we maintain our full year outlook for capital expenditures, our store expansion plan is slightly revised. Due to a slight delay, the number of new group-owned stores opened during the year will amount to 9. In addition, the store network is expanded with 3 retailer-owned stores joining the network from competing retail chains. As for items affecting comparability, structural costs in City Gross are now estimated to amount to SEK 150 million. As a reminder, the outlook for next year 2026 will be presented in conjunction with the release of our year-end report.

Please now turn to Page 24. So let me summarize. We are summarizing a strong third quarter with higher growth than the market and improved earnings in all operating segments. Just over a month ago, we held a Capital Markets Day at which we discussed how our business model and structure create opportunities. We also laid out our main competitive advantages, and I would like to mention them here again. First, with our brands, both in-store concepts and private labels and a high-quality affordable assortment, we are well positioned to meet consumers' diverse and evolving needs. Second, we have attractive store locations and a significant potential to expand. Third, our integrated value chain provides the right conditions to quickly adapt when customer behaviors or market conditions change, and it also gives us efficiency. Fourth, to us, the key to drive long-term growth and profitability is based on customer traffic, loyalty and volume growth. We have seen a strong development in all these areas over a long period. And with our scale, we can further strengthen our competitiveness.

Our performance in the third quarter really shows how we drive growth in all segments on the market, both organically and through expansion and how our integrated value chain gives us efficiency. The strength of our business idea enable us to continue to challenge and grow. We are maintaining a high rate of development, and I am convinced that we are poised to strengthen our market position in the years ahead. That was all for today.

Now please turn to Page 25, and I hand over to the operator to open up the line for questions. Thank you.

[Operator Instructions] The next question comes from Fredrik Ivarsson from ABG.

I have 2 questions. First, if we could dig into the margin profile in Willys a little bit. So I guess Q3 tends to be quite a bit stronger than the other quarters, especially Q1 and Q2, but now it's been almost in line with the previous 2 quarters for 2 consecutive years. And I know you took some price investments last year. But in addition to that, I guess, has the market been -- has it been even more campaign-driven during the summer months? Or do you see anything else that sort of explains why the normal margin uptick that we usually see in Q3 didn't really materialize this year?

Yes. Thank you for your question. As you said, there are some seasonal effects and also the mix effect also have an impact on the margin on Willys. But I would say, to start with Willys had a stable margin development, even though there's a really high competition in the market. And we have a customer that is pretty much in the same behavior as we've seen in the last year with a strong focus on price and with a high price activity level in the market. So by that, we still have -- we continue to have a stable margin development in Willys, which we are really happy to see. And one thing that is also affecting a little bit on the bottom line for Willys is that we have a high expansion rate in Willys. This year until September, we have opened up 7 new stores for Willys compared to 4 last year. And by that, we see some -- the margin gets some -- it dilutes in the margin because we get higher personnel costs when we open stores. And then it usually evens out after a couple of months. But when we open many stores, we have some more personnel costs -- staff cost for staff during the first -- until you get up in a growth rate in the stores.

Okay. That makes sense. And second one on City Gross. You have been talking about your earnings getting back to black figures during the second half of 2026, and now you sort of reiterated that statement. But you were almost there already in Q3 this year, although on an adjusted basis. Has the progression in City Gross been stronger than you expected before? Or was this more or less according to plan, so to say?

I would say we are working according a comprehensive plan to turn around City Gross, both to create growth since it all starts with a growth in like-for-like sales. So I would say we're pretty much following our agenda for City Gross. There are some seasonal effects also in the hypermarket segments during Q3. So I would say, since we are -- this is a journey, and we see something, it will go up and it will go down. We are here in the long run to create a really strong format in the hypermarket segment. So I would say we are not ahead of our plan. We are following our plan. So we reiterate our guidance for the second half of 2026. However, we are really happy to see these positive signs, primarily on the like-for-like sales, I would say, because that's where it all starts. And then, of course, that we see the result of the initiatives that were made to decrease the cost level. It's -- of course, we're really happy to see that we see these positive signs. But we are according to plan, I would say.

Okay. And maybe a short follow-up on the like-for-like growth in City Gross. I recall you did some price value investments. Would you care to give sort of a ballpark figure on the volume growth in the quarter?

I would say we have a comprehensive agenda regarding the growth, and it's all about developing the offering, both the assortment, but as you said, also to strengthen the price position. It's also about how we do the marketing, the campaigns, it's about operations in store. And I would say that it's a mix of growth and price. But as you said, we are strengthening the price position in City Gross. And by that, the majority is driven by volume.

The next question comes from Gustav Hagéus from SEB.

I'll take over from that last statement of yours that you had primarily volume growth in City Gross in the quarter. And if I read correctly, that was the case also for Willys and Hemköp, which is a bit contradictory to the market growth, which appears to have been 4 out of 5 percentage points in the quarter and the market was inflation. And you say that you've primarily driven your growth through volume, given that you're 25% or so of the market then, it appears then that you've price invested compared to the market quite a bit here in Q3? Or are we talking different numbers that don't really add up here?

Yes. I understand it's difficult for you to see because what you can see is the SCB figures on inflation, and that consists of a basket that is set once a year and it's not -- I would say it's not changes over the year. So they set the basket once a year and then they could, I would say, differentiate the volumes. However, when we look in the price factor internal figures, it's a gap between those figures. And I will not be able to say our figures, but there -- and that has been the issue for all times that we don't really see the same internal figures on pricing than SCB's reporting.

Okay. But then on a general topic question then, given that the margin seems a bit under pressure and also your comments on much price action in the market and price competition, is your view that you've lowered prices in the quarter and more so than competitors regardless of what the SCB figure is?

No, I would say -- I mean, I normally don't go into details about our price strategy. But for us, it's always about securing our price positions in the market where Willys, of course, is the cheapest on the market. And also Hemköp, it's important to be really price attractive, and we see really good, how you say, development in the -- that's what I wanted to show you also, the customer figures about Hemköp really taking notice of the price position that they have changed during the years. So the only way, of course, it's about for us always to be competitive in the market, but within City Gross, we made the price investment that we talked about, both in August and in April. So for the other formats, it's all about always to be competitive in the market. So I would say the margin for both Hemköp and Willys has been stable during this year.

Sure. But turning then to Dagab, just help us understand what the underlying development is here. If I recall correctly, you called out SEK 11 million extraordinary costs for Middagsfrid and another SEK 20 million or so for ramp-up costs of the new facility last Q3. Just to understand, when looking at Dagab's development here, EBIT year-over-year, if you were to add back those figures to the comparable, EBIT is flat or actually a little bit down year-over-year. And you have called or guided the market for up to SEK 300 million in savings on a yearly basis once fully ramped up in Dagab. I understand you're not there, but it would be very helpful if you can help us understand, first of all, if that base is correct, so that operating earnings are basically flat to slightly down for Dagab? And secondly, if you have, how far you've come on that journey towards SEK 200 million to SEK 300 million savings on an annual basis for Dagab and where that money went. We note that margins in City Gross, for instance, are quite much better than consensus here today.

Yes. Thank you. For Dagab, we are realizing the efficiency gains, both in BÃ¥lsta and also in Landskrona, our fruit and vegetable warehouse. So we see that the productivity is increasing, and we are realizing the efficiency gains. So we early communicated the spend from SEK 200 million to SEK 300 million on a yearly basis, and we are in the lower spend, i.e., SEK 200 million. However, we both have a negative margin development in Dagab due to mix effects, the gross margin, I mean, gross margin development in Dagab due to mix effects. And that is because Dagab is supporting the chains in the role in the market. And also, we have some product mix that is affecting the gross margin negatively for Dagab. So we see the positive effect in Dagab in realizing the efficiency gains and the productivity, and then we have a negative effect on the gross margin.

But is the mix effect explaining then the SEK 50 million negative underlying development for Dagab? You have volume growth, right? So it should be some type of uplift? Or is that going into some of the other retail concepts like City Gross? It would be, I think, very helpful since you have that breakeven target on City Gross, I think it would be helpful to understand how much of that is actually just transferral from Dagab and how much is sort of underlying improvement for City Gross?

So the gross margin development in Dagab consists of different part, as I explained. First, the mix effect, which is a negative because we had deflation in fruit and vegetable that is affecting the gross margin in Dagab negatively. Dagab is also supporting the chains, and that is what we see on the negative side. We're realizing the efficiency gains in Dagab, both in BÃ¥lsta and the fruit and vegetable warehousing up till now.

Okay. So last one, sorry to dwell on this, but I think it's quite important since you have the target to go breakeven in City Gross and you have guided for up to SEK 300 million savings in Dagab. Do you expect Dagab to showcase any of those savings into Q4 next year? Or is that going to go into the other concepts? And how do you distribute them then between you think Dagab and City Gross and Willys, just to get a feel of what's going on underlying.

For us, it's about leveraging our business model, and that's about growing as a group in a whole. And we do that by having strong store concepts, growing like-for-like and total sales. That gives us volume in the behind and then we become more efficient. So for us, it's really important to do the long-term investments we do in our logistics structure so we can be competitive over time. The efficiency gains, you don't -- maybe we don't see them in Dagab as well. You have to look at us as a group and a whole. So for us, it's really important to grow like-for-like sales in City Gross and then to have growth in all our segments. And this quarter, we show growth in all segments. We show increased operating margin in all our segments, which is really positive, and that make us summarize a really strong quarter. So for us, it's about leveraging our business model and also playing the game where our competitive edge is. And that I think that this quarter shows really that we're doing.

The next question comes from Magnus RÃ¥man from SB1 Markets.

I'd just like to ask on the price and inflation topic again because now you state that you see a bit different numbers internally. But if we just relate to the SCB stats, we had a food price inflation that rose in the early spring this year, an index level that came up and thereby also year-on-year inflation. However, this index level and the inflation rate has come down sequentially in the recent 2 months. And if we look ahead and if we just assume an unchanged index level, we will, of course, then come to very low inflation rates entering next year, and then we have the halving of the VAT in April. But from this perspective of food prices, I'd like to ask, firstly, if you see -- I mean, those price changes can be driven both from changes in your procurement cost and also from competitive pressure. Do you view that the decrease in prices that we've seen in recent months have been driven by reduced sourcing costs? Or is it an increased price pressure that you see in the market?

I would say that the inflation -- even though we don't see the same figures at SCB, we see the same trends within our internal figures. I'd just like to clarify that. But the trends that we see is driven by the, how to say, the sourcing, the price fluctuations that we see in our sourcing. So as you said, we have a shortage in the market on red meat, also in dairy, and that increased the prices in the beginning of the year and continue during the year. And then we have deflation in fruit and vegetable that has come down because of the sourcing prices. And I would say that it's pretty much what you see in the market changes in the pricing. And then if you look into the VAT, as you asked, of course, we see positive on the VAT because we have a consumer that has been under pressure for many years. So by reducing the VAT in Sweden, we create a consumption spend for the consumer. And of course, that will be positive. How that will affect us volume-wise, it's really, really difficult to make any forecast on. So we better come back to that when we implement the new VAT level in April next year.

Right. But there was a question also previously about underlying volume. And I guess that maybe it's good to clarify that underlying volume growth could not only be driven by sort of an increase in the number of units, it could be a mix shift when people trade up if they buy more meat sort of more -- yes, higher quality type of meat, then you get an implied volume growth, but it could mean that it's not more calories consumed, it's a higher sort of -- it's a shift up in mix towards the premium end. And I mean, with the halving of the VAT, I guess it's fair to assume that we would see some type of mix shift that could contribute to your end margin and profitability. Yes.

It's difficult to make forecast about that. But I would just say that when we talk volume, we talk volume and when we talk mix or price, it's a different thing. So when I say volume, I don't talk about mix. I would just clarify that. But of course, we're hoping, as we see that the volume goes up within fruit and vegetables when the prices comes down, we are hoping to see a little bit more -- I would say, the share of the more sustainable food to increase, we hope for that, but it's very difficult to make any forecast about it. It's really positive for the consumers to have a larger consumption share.

Right. But so to conclude, the overall gross margin improvement that we see clearly on the group level, both in year-on-year terms in Q3 and in year-on-year terms on the 9-month rolling or 9 months-to-date basis is, in your opinion, predominantly driven by a relief in the sourcing costs rather than a relief in the price pressure in the market.

Now you said the development of the margin, that was not -- you asked about the price. So to start with the -- Anders, sorry.

Yes, sorry. Magnus, the gross margin that you see in our report is not the same as the gross margin that we see in our chains and in our stores because it's how to -- we disclose and report the COGS. It's a different way. Yes, I know that we have to wait for the annual report to get the product margin. But yes, what I'm trying to get at is that there should be -- if you look at the overall sourcing costs from an [ SAO ] index perspective, for example, we see that we should not expect an increasing pressure, rather a relief in the sort of pressure. And with the items that you mentioned that goes into the gross margin, for example, diesel prices and for transportation and so on, that is also points to a relief rather than an increased pressure.

But this leasing pressure also obviously affects the prices in the stores. I mean they follow the way out in the stores.

Yes, exactly. And I mean the indexation of rent should be flat, if anything, entering '26, I guess, with the inflation rates we have now.

Yes. What happens in '26, we have to come back to...

Right. Okay. I'm happy with that.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So I would like to thank you all for joining us today, and I hope to see you in next quarter.