Jerónimo Martins Navigates Challenges with Resilient Q1 Performance

Jerónimo Martins SGPS, S.A. delivered a mixed but encouraging set of results for the first quarter of 2025, demonstrating resilience in a challenging macroeconomic environment. While revenue fell slightly short of expectations, earnings per share (EPS) surged ahead of forecasts, driving a sharp stock price rally. Strategic expansions and disciplined cost management underscored the company’s ability to navigate headwinds, though risks remain.

Ask Aime: "Resilient Earnings Fuel Rally; Could Jerónimo Martins Shares Keep Rising?"

Key Financial Highlights

The company reported €0.22 in EPS, a 23.5% beat against analyst estimates of €0.1782, fueled by effective cost controls and margin stability. Revenue reached €8.38 billion, a 3.8% year-over-year increase but €40 million below forecasts, primarily due to calendar effects (e.g., Easter falling outside the quarter). EBITDA grew 3.8% to €528 million, maintaining a stable 6.3% margin despite rising labor costs. A dividend of €0.59 per share was approved, reflecting strong cash flow management, with total dividends reaching €370.8 million.

Ask Aime: How did Jerónimo Martins SGPS, S.A. manage to outperform EPS expectations despite revenue missing forecasts?

Operational Strengths and Strategic Moves

• Biedronka (Poland): Sales rose 3.4% to €5.9 billion, though like-for-like sales dipped 3.5% due to calendar effects and tough year-on-year comparisons. Expansion efforts continued, with 56 new stores opened and 27 remodeled. The chain also launched operations in Slovakia, opening 4 stores and a distribution center, though initial costs were noted as dilutive.
• HABEST (Health & Beauty): Sales jumped 11.9% to €145 million, driven by price deflation strategies to counter competition. Online sales accounted for 21% of turnover, highlighting digital growth.
• Pingo Doce (Portugal): Sales grew 2.8% to €1.2 billion, with like-for-like sales at 1.1%, aided by store reconfigurations and promotions.
• Ara (Colombia): Sales increased 9.1% to €775 million, with like-for-like growth of 3%, supported by 9 new stores and cost discipline.

Cost Management and Risks

The company’s tight operational controls shone through:
- Labor Costs: Rising minimum wages in Poland and Portugal pressured margins, but savings in temporary labor and fuel costs partially offset these challenges.
- Corporate Costs: Managed tightly, with no significant one-time expenses.

However, risks persist:
- Economic Volatility: Cautious consumer behavior and low food inflation in key markets threaten sales momentum.
- Competitive Pressures: Intense competition, particularly in Poland’s food retail sector, requires ongoing promotional investments.
- Margin Pressures: While Q1 margins held steady, full-year stability faces headwinds from minimum wage hikes and promotional activity.

The stock surged 7.78% to €23.00 post-earnings, nearing its 52-week high of €23.18, reflecting investor confidence in its strategic execution.

Strategic Priorities and Outlook

Management emphasized three pillars for 2025:
1. Price Competitiveness: Maintaining Biedronka’s leadership through aggressive promotions.
2. Cost Discipline: Balancing growth investments with margin protection.
3. Selective Expansion: Prioritizing Slovakia and Colombia, with plans to integrate 70 stores in Colombia by Q2.

Despite risks, the company’s positive cash position of €332 million and a P/E ratio of 23.89 signal investor optimism about its long-term prospects. However, short-term liquidity challenges (current ratio of 0.61) and geopolitical risks remain concerns.

Conclusion: A Resilient Foundation Amid Uncertainty

Jerónimo Martins’ Q1 results highlight its ability to navigate a challenging environment through strategic expansions and cost discipline. The 23.5% EPS beat, stock surge, and stable margins demonstrate operational resilience. While risks like labor costs and competitive pressures linger, the company’s focus on price leadership and selective growth positions it to capitalize on recovery in key markets. Investors should monitor execution in Slovakia and margin trends, but the fundamentals—strong cash flow, disciplined management, and a premium valuation—suggest this retailer remains a solid long-term bet in European retail.

As the company continues to expand its footprint and adapt to evolving consumer behaviors, the coming quarters will test its ability to sustain growth in an uncertain macroeconomic landscape. For now, the first quarter underscores its strategic agility.