Challenging market situation for ICA – shoplifting a major problem
“Since late summer, the difficult economic situation has become obvious to all of us and higher costs greatly affect the behaviour of our customers who prioritize low price and increase the proportion of low-price products when shopping,” says Per Strömberg about the results in ICA for the third quarter.
The outgoing CEO continues: “In the short and medium term, this means that ICA must become even better at offering value for money, strengthen customer loyalty and ensure a competitive cost level throughout the company. The importance of this becomes particularly clear given the outcome in the third quarter when our margins in the grocery business were weaker and sales growth too low.”
A problem that reinforces the negative market outlook is increased wastage as a result of a strong increase in shoplifting.
With far weaker purchasing power, more customers are tempted to steal. Incidentally, it is a phenomenon we see throughout Europe.
ICA is losing market share
Food price inflation in Sweden was 14.5 percent in the third quarter and in the Baltics, it was between 22 and 30 percent in the three countries.
Sales growth is high in our grocery operations, but the inflation rate is even higher, which means falling volumes. Neither in Sweden nor Rimi Baltic are our store sales growing at the same pace as the market, which means we are losing market share. In Sweden, it depends to an increasing degree on the price focus that now dominates and where low prices are becoming increasingly important. Our focus on price value and strengthened customer loyalty will therefore be intensified. We see the same thing in the Baltics, where new low-cost players have entered the market. This development is not unique but characterizes grocery markets across Europe.
- The operating profit for the third quarter of 2022 (SEK 1,694 million) fell by 6.8% compared to the third quarter of 2021 (SEK 1,818 million).
- ICA Gruppen's turnover for Q3 increased by 7.6% to SEK 34,533 million (SEK 32,094 million), driven by high inflation.
- High inflation and rising energy costs create major challenges at all levels.
- Squeezed margins especially in the grocery business because of lower volumes and higher costs.
- ICA Sweden's margin for Q3 decreased to 4.7% (5.2%).
- Halved profit and significantly lower margin for RIMI Baltics
- Apotek Hjärtat is growing faster than the market, but with lower earnings and margins.
- ICA Banken increased turnover and profit.
- Capital gains from property disposals in Sweden are included in the result of SEK 300 million.
Sources: ICA, Per Strömberg, DN Sweden.