Portuguese retailer Jerónimo Martins posted a larger-than-expected 28% drop in second-quarter net profit, as a decline in margins from food price deflation offset higher sales at Polish market leader Biedronka.
The company said in a statement that its consolidated net profit fell to €156 million ($169 million) in the quarter, while analysts polled by LSEG had expected, on average, a profit of €167.6 million.
Chief executive Pedro Soares dos Santos said "2024 has been marked, after an inflationary cycle, by the harsh effects resulting from a sharp correction in food prices and a significant cost increase" and that he expected this to continue in the second half of the year.
"In this context of uncertainty...we will stick to our priorities: ...grow sales in volume, as pivotal for preserving our competitiveness, increasing our customer bases, and expanding market shares," he said in a statement.
Divisional Performance
Consolidated sales rose 6.8% to around €8.2 billion in the quarter fuelled by a 5.7% increase at the Polish market leader Biedronka, where sales reached around €5.8 billion.
However, Biedronka's like-for-like sales in Polish zlotys fell by 4.6% in the quarter after rising 4.6% in the previous three months.
Finance chief Ana Luisa Virginia told a conference call that Polish consumers are being more cautious with their spending given an uncertain economic backdrop.
'The lack of consumer dynamism has also contributed to the noticeable intensification of competition in the food market,' the group said, referring to its Polish business.
Virginia added that the group expects a deflationary environment to continue in the second half of the year.
At home, sales at the Pingo Doce supermarket chain rose 3.7% to €1.2 billion, while in Colombia its Ara stores booked €721 million in sales, up 22% from a year earlier.
Quarterly Highlights
Consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped 4.8% to €532 million, below the average of €557.5 million expected by analysts.
The company's EBITDA margin – a key measure of profitability – slipped to 6.4% at the end of June from 6.9% a year earlier.
The margin at Biedronka fell to 7.6% from 8.5% a year ago.
Jeronimo Martins' shares fell more than 18% on Thursday (25 July), on track for their biggest daily decline.
J.P.Morgan analysts said they were 'cautious' on the outlook for the second half.
