Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jeronimo Martins SGPS SA (JRONY, Financial) achieved a 10.3% sales growth, 4.7% at constant exchange rates, reaching EUR24.8 billion.
- The company maintained a solid balance sheet with a net cash position of EUR430 million by the end of September.
- Biedronka and Pingo Doce continued to grow volumes and gain market share despite operating with basket deflation.
- Ara improved its EBITDA margin by 127 basis points in the first 9 months, showing effective cost management.
- HeBe's sales grew by 20.6% in local currency, driven by strong e-commerce performance and a like-for-like growth of 11%.
Negative Points
- EBITDA margin was pressured by operational deleverage from basket deflation and significant cost inflation.
- Net earnings per share, excluding non-recurrent items, fell by 13.8%.
- Cash flow was negative EUR387 million, impacted by the transition from high food inflation to deflation.
- The company faced significant wage increases, particularly in Poland, impacting operational costs.
- The HoReCa channel in Portugal showed a slowdown trend, affecting Recheio's sales performance.
Q & A Highlights
Q: Could you please quantify the basket deflation in Q3 in Poland? And how has it evolved through the quarter? Also, can we assume that gross margin in Poland was flat?
A: Basket deflation in Poland slowed down, with Biedronka operating at a slightly softer rate of just over 4% in Q3 compared to slightly below 6% in the first half. The gross margin in Poland was not flat; it was down due to increased price investments, with around 20 basis points invested in the gross margin.
Q: In July, you guided towards a higher EBITDA margin contraction in Poland in H2 versus H1. Is this guidance still relevant?
A: The guidance remains relevant, though Q3 was slightly better than anticipated. The pressure on EBITDA will depend on the Christmas season's performance. The cost increases remain similar to previous quarters, and the guidance for continued pressure is maintained.
Q: Could you update us on the current trading in Poland at the start of Q4 and the sales evolution during the third quarter, particularly in September?
A: Current trading in Poland shows no significant change in consumer behavior, with price remaining a critical factor. The market numbers for September were weak, influenced by calendar effects. Consumers are not spending significantly more on food despite increased real income.
Q: Would you expect Biedronka's basket to stay deflationary over 2025 given the current consumer outlook?
A: The pricing environment for 2025 will depend on several factors, including competition. While there may be some commodity price increases, the competitive environment may lead to flat or even deflationary basket prices in some categories, particularly in the first half of 2025.
Q: Could you give a little more comment on what is driving the working capital outflow?
A: The working capital outflow is influenced by calendar effects, corrections in payment terms for smaller suppliers due to high interest rates, and the evolution of prices from suppliers. The company uses working capital as a strategic tool to maintain competitive purchasing options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
