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Jumbo | Jumbonomics v2025: from soft landing to margin tailwinds

FY24 as resilient as could be given multiple headwinds… – 2024 left us with mixed feelings, with Jumbo delivering just 4% adj. EBITDA and c3% adj. EPS growth on 6.3% sales growth, due to mild gross margin compression and cost deleveraging from new capacity (c0.7pps increase in opex/sales). That said, the actual performance eclipsed the overly cautious message echoed by mgt last summer (flat net income), validating the resilience of the business model. FCF was weaker than our expectation due to Jumbo stocking up, but was still very robust at c€1.7/share (c7% yield). The decision for no further dividend proposal out of FY24 profits was a negative in terms of optics, especially as the balance sheet can easily fund both inventory build-up and dividends, but we reckon that special distributions remain on the table for the coming quarters.

FY25: Many reasons to be cheerful – Contrary to 2024, which started with several headwinds, 2025 looks primed to shape as a year of significant cost normalization, thus bolstering gross margins. In particular, freight rates have reverted to near pre-COVID levels, reflecting ample global shipping capacity, while the trade tensions between the US and China create a favourable procurement environment as Chinese exporters look poised to redirect surplus volumes to Europe. Currency trends are also supportive, with the depreciation of both the USD and CNY bolstering Jumbo’s already strong sourcing leverage. Overall, we expect these dynamics to underpin 120bps gross margin expansion in 2025e. Coupled with a mild dilution of opex/sales, in line with the typical lag between store openings (3 in 2024) and full ramp-up, we expect EBIT margins to increase c1.45pps in 2025e filtering through to c8% adj. EPS growth. Looking further out, we model c5-6% sales growth (c2-3% from capacity) resulting in c6% EPS CAGR in the next 4 years. Relative to our prior estimates, we have trimmed 2025e c1-2% while raising 2026e by a similar magnitude.

One caveat about Romania – Romania’s narrative has recently softened, with same-store sales negative since Q3’24 by our estimates. Explaining this reversal are: 1) rising competition from Pepco’s continued expansion and TEDi’s market entry, both directly targeting Jumbo’s value-conscious consumers (with competition set to intensify after the entry of Action in the market); 2) Self cannibalisation from Jumbo’s rollout pace (3 new stores since early 2024), especially in urban areas like Bucharest (5 stores); 3) Broader inflationary pressures and cautious consumer spending—evidenced by Pepco’s recent negative LFL CEE sales. We now anticipate slightly negative LFL in Romania in 2025e and just 1.5% LFL growth over 2026-29e.

Current price continues to embed value destruction; Buy – After several twists and turns, Jumbo’s price remains c8% off the 2024 peak, weighed down by the side-effects of the 2024 placement (c3% stake, at €27.2) and the sometimes overly downbeat message echoed by mgt. With the stock trading at c7x 1yr fwd EV/EBITDA and c10.6x fwd PE offering c8% FCF yield, we find the thesis derisked (especially as our DCF decomposition exercise shows that the current EV is below the value implied by current operating profits) and see a very compelling risk-reward given the multiple pillars of margin expansion for 2025.