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JUMBO | Margin debate ongoing but cash returns carry the story

Gross margin debate remains front-of-mind – Jumbo’s FY25 results were lukewarm, with resilient sales failing to flow through meaningfully to earnings. Revenues rose 7.2% yoy, but gross margin retreated c90bps to 54.7%, driving EBITDA and net profit c2-3% below consensus (net profit +3% yoy on adjusted basis). Mgt attributed the decline partly to the higher contribution from lower-margin franchise activity, but this does not fully settle the debate, in our view. The conference call revealed that guidance has been framed more as a prudent budget than a point estimate grounded on clear margin visibility. The procurement cycle remains difficult to read from the outside, with limited transparency on how FX, pre-buying, freight rates and supplier negotiations flow through COGS, especially as reported gross margins reflect purchasing conditions prevailing several months earlier. For FY26e, while the backdrop is not uniformly adverse (e.g. supportive FX), mgt’s stance appears deliberately cautious, implicitly pointing to a further 100-200bps downside without a clearly articulated analytical anchor. That said, qualitatively mgt struck a more optimistic tone than in prior interactions, suggesting “better times” ahead, albeit with notable self-awareness on forecasting accuracy. Overall, our numbers are predicated on c40bps gross margin contraction in 2026e to c54.3%.

Lowering estimates c4-6% – We leave revenues broadly unchanged, in sync with a normalised c6% growth algorithm. However, lower margin assumptions drive 4-6% EBITDA/net profit cuts over 2026-28e. We now model €336m net profit in 2026e (+5% yoy, 5-8% above mgt guidance), followed by +4% in 2027e. We note that mgt has added some strategic optionality, namely the introduction of Turkey e-commerce by end-2026 and a pop-up pilot in Romania. In addition, the likely expansion of the franchise network into new geographies through the Balfin partnership amplifies the capital-light avenue for medium-term growth, which could gradually move the dial if scaled. These initiatives do not constitute major near-term earnings catalysts, but they broaden the toolkit and could present upside risk to forecasts.

Cash returns remain the saving grace – The proposed €0.70 DPS brings 12m cash returns to c€1.70/share, or c7% yield. This validates our long-held view that, when growth opportunities are less dynamic, Jumbo will tilt excess cash toward shareholders. We still see no structural reason why Jumbo cannot distribute €1.50-1.60/share per annum. Importantly, the c€95m logistics capex planned over the next three years looks comfortably covered by operating FCF on our numbers, allowing Jumbo to keep rewarding shareholders without eroding its net cash position.

Valuation: Still too cheap, but catalyst-poor in the near term – Following our earnings revisions, our DCF-derived PT moves down to €32, but indicates plenty of upside as the stock looks too cheap given the net cash and the >€1.5/share FCF generation. That said, cheapness alone may not be enough to force a re-rating. With FY26 guidance pointing to net profit -3% to 0% yoy, and no obvious near-term earnings upgrade trigger, we acknowledge that the route to value crystallisation will likely be slow, driven by cash returns rather than a fresh earnings acceleration cycle.