Jeronimo Martins Thrives with Sales Growth in a Challenging Market

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Jeronimo Martins Thrives with Sales Growth in a Challenging Market

International food retailer Jeronimo Martins reported a 10.3% increase in total sales, reaching 24.8 billion EUR, in the first nine months of 2024, despite a challenging economic environment. The company, which operates the Biedronka brand in Poland, achieved sales growth and market share expansion despite experiencing basket deflation. During this period, EBITDA rose by 2.7% to 1.6 billion EUR, although the EBITDA margin declined to 6.6%. Reflecting a cautious approach amidst ongoing market uncertainties, the company revised its capital expenditure guidance to just above 1 billion EUR for the year.

Key Highlights

  • Jeronimo Martins' total sales increased by 10.3% to 24.8 billion EUR.
  • Like-for-like sales growth was adjusted down to 0.3% from the previously reported 3%.
  • EBITDA rose by 2.7% to 1.6 billion EUR, while the EBITDA margin fell to 6.6%.
  • The company opened 104 new stores and renovated 156 stores in Poland.
  • Capital expenditure guidance for 2024 was adjusted to slightly above 1 billion EUR.
  • The outlook for the remainder of the year remains cautious due to market uncertainties.

Company Outlook Management maintains a cautious outlook for the future, backed by a net cash position of 413 million EUR and a strong balance sheet. The company anticipates a challenging fourth quarter due to strong comparative figures from last year's volume growth. Projections for food inflation remain uncertain, with strong single-digit inflation expected, although actual figures may be lower.

Declining Factors In Poland, gross margins fell by approximately 20 basis points due to significant increases in pricing investments and operational costs. Weak consumer demand in Poland, with a focus on savings, is impacting food expenditures. The competitive landscape in Poland is expected to remain aggressive with ongoing store openings.

Growing Factors Despite significant basket deflation, sales and market share grew in Poland. In Q3, gross margins showed some resilience, performing slightly better than expected in a challenging environment. The company continues to focus its long-term strategy on profitability and market positioning.

Below-target Performances The EBITDA margin contracted due to a loss of operational leverage and wage increases. The capital expenditure program has been reduced, indicating adjustments in the company’s investment strategy.

Q&A Highlights The adjustment of like-for-like sales growth to 0.3% reflects mixed regional results. Management is uncertain about the pricing environment for 2025, with the possibility of deflation or stable prices in the first half of the year. In Poland, opportunities for new store openings, particularly in small towns, are being monitored with careful assessment of the return on invested capital for each location.

Jeronimo Martins (JMT.LS) continues to adapt to dynamic market conditions, balancing its growth initiatives with cost management. The company's performance in the first nine months of 2024 demonstrates resilience amid declining food inflation, rising costs, and weak consumer demand. Jeronimo Martins is positioning itself by maintaining a strategic approach to capital expenditures and store expansion while remaining committed to long-term profitability and market presence amid market uncertainties.