Swedish retailer ICA Gruppen has reported a 6.8% decline in operating profit to SEK 1.7 billion (€160 million) in the third quarter of its financial year.
The company's performance was impacted by lower sales volumes, rising costs and lower earnings, particularly for Rimi Baltic, which saw a 49.6% decline in operating profit during the quarter.
ICA Sweden saw a 2.3% decline in operating profit, to SEK 1.2 billion (€110 million), while Apotek Hjärtat registered a 9.4% decline to SEK 142 million (€13 million).
CEO of ICA Gruppen, Per Strömberg, stated, "We posted a slightly weaker operating profit excluding items affecting comparability for the third quarter. It is above all Rimi Baltic that had weaker earnings, largely owing to the fact that higher energy costs are not yet fully reflected in our our pricing.
"In Sweden, too, the operating margin was lower, but earnings in kronor are stable. In addition to smaller sales volumes, ICA Sweden has been affected mainly by higher logistics and transport costs, while higher energy prices are something that impact ICA stores to a higher degree."
The company's consolidated net sales increased 7.6% year on year, to SEK 34.5 billion (€3.2 billion), in the third quarter.
Price effects were positive, mainly for Rimi Baltic and ICA Sweden, but negative volumes dampened sales growth, the retail group noted.
Food price inflation in Sweden touched 14.5% during the third quarter, and in the three Baltic countries it ranged between 22% to 30%.
Strömberg added, "Since late summer the difficult economic situation has become tangible for all of us, and higher costs are significantly affecting the behaviour of our customers, who are prioritising low prices and buying a greater share of discount products when they shop."
Elsewhere, sales in Apotek Hjärtat and ICA Insurance were driven primarily by increased volumes.
Backed by good profitability, stable cash flows and a strong position in the market, ICA Gruppen believes it is equipped to succeed, if it employs its strengths in the right way.
It also emphasised the need to act quickly and adapt to changing consumer behaviour and market conditions.
The company noted that the current situation is challenging and there are no signs of it easing in the near future.
According to Strömberg, this situation "entails continued pressure on value chains and high inflation, with significantly rising prices and reductions in disposable income for our customers, who are now being forced to take a close look at their expenses and refrain from certain purchases or prioritise others – both in Sweden and even more so in the Baltic countries."
"In this regard, from our side we need to work hard together with the ICA retailers to offer price value and competitive offerings to our customers in an effort to make life easier in a tougher situation," he added.
© 2022 European Supermarket Magazine – your source for the latest retail news. Article by Dayeeta Das. Click subscribe to sign up to ESM: The European Supermarket Magazine.