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Retail

Rimi Baltic, Apotek Hjärtat Weigh On ICA Sweden In Second Quarter

While Swedish retailer ICA posted a consolidated net sales increase of 4.6% in the second quarter of its financial year, all aspects of its businesses were impacted by the COVID-19 pandemic, particularly its Rimi Baltic and Apotek Hjärtat operations.

In Sweden, the business posted SEK 25.5 billion (€2.47 billion) in sales for the quarter, up from SEK 21.9 billion (€2.12 billion) a year earlier, despite both the COVID crisis and increased food price inflation, with the retailer noting that increased consumption at home helped boost its quarterly performance.

The group's Swedish e-commerce arm surged during the quarter, growing by 165% in June alone, with online sales as a share of total store sales more than doubling.

At-Home Dining

"It is clear that customers are eating at home to a greater extent and also seem to be spending more time preparing food, which benefits us," commented Per Strömberg, ICA's chief executive. "We can also note that the average spend is increasing, while the number of customer visits is decreasing.

"Customers are looking for a wide product range on every shopping occasion, which means that the larger stores are experiencing better growth, all else equal."

Profit at ICA Sweden stood at SEK 1.11 billion for the quarter, up from SEK 949 million in the corresponding period last year.

The group's Rimi Baltic operation posted sales of SEK 4.05 billon (2019: SEK 4.07 billion) in the quarter, while profit dropped to SEK 147 million (2019: SEK 175 million), as the business faced 'strict shutdowns' in the three markets in which it operates.

"This resulted in weak sales during the quarter with the exception of Lithuania, where our stores – owing to their locations – were not as exposed to reduced customer traffic," Strömberg said. "Rimi Baltic has stable underlying growth, but it is important going forward that we can accelerate growth, as we are still not keeping pace with growth of the market."

Apotek Hjärtat, meanwhile, suffered due to consumer hoarding in the first quarter of the year – the business posted sales of SEK 3.64 billion (2019: SEK 3.78 billion), while profits more than halved to SEK 66 million (2019: SEK 42 million).

"Apotek Hjärtat and the entire pharmacy market experienced a sharp reversal of the first quarter's hoarding effects," Strömberg said. "Development during the second quarter went in the exact opposite direction, with lower sales and a large drop in volume, especially in April and May. The effects were larger than what we had expected, and they will likely also continue longer than we had previously thought."

ICA has pledged to adjust cost and improve efficiency across its Apotek Hjärtat operations, particularly in e-commerce.

Looking ahead to the remainder of the year, ICA said that it is now clear that the effects of COVID-19 on its business will be more enduring than had been expected a few months ago, adding that it plans to invest more in e-commerce and digitalisation, as well as increase its focus on locally-produced foods.

Analyst Viewpoint

Commenting on the group's performance, Barclays European Food Retail Equity Research said that while ICA Sweden performed ahead of its margin expectations, both Rimi Baltic and Apotek Hjärtat came in below its forecasts.

'While 2Q performances at ICA Sweden were above [both] our and Infront Data consensus expectations thanks to continuing positive food inflation and dynamic volume growth for the Swedish food retail market during the period, they were however much lower than our and the consensus expectations at ICA’s two other main divisions, Rimi Baltic and Apotek Hjärtat due to the COVID-19 pandemic,' it said.

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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