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JUMBO | Margins bruised but value unbroken; top pick

Somewhat disappointing H1, but H2 set to be better – Jumbo’s H1 results were rather disappointing, with adj. EBITDA up just 7% yoy but shaping c5% below our estimates. The disappointment stemmed from a 1.4pps yoy contraction in gross margins, contrary to our expectation for expansion and out of sync with the appreciation of the EUR vs the USD. This led to net profit of €117m, -4% yoy, or -8% vs our number, with the optics of reported numbers affected further by the tough comp due to last year’s insurance compensation (€10m). Although mgt noted that the FX tailwind will become evident in H2, the message was again underwhelming for the FY, with mgt alluding to flattish “underlying profits”. On our math, mgt guidance implies c3% yoy lower pre-tax profits in H2, despite the FX tailwind, which we find hard to reconcile with the underlying drivers.

Mild earnings downgrades; mid single-digit sales growth story but margin trajectory less clear – Reflecting the weaker than we had envisaged H1 and delayed benefit from cost tailwinds, we trim 2025e EBITDA by 1%, with lower gross margins partly offset by a stronger sales trajectory. We still see healthy adj. EBITDA growth in 2025e (+8%, following +7% in H1) leading to reported net profit growth of +4%. Looking further out, the opacity around procurement policy (pre-buying etc.) and the intensifying competition along with challenges in Romania make it difficult to build conviction in the sustainability of gross margins. We thus model just 30bps gross margin accretion in 2026e followed by contraction over 2027-28e, with gross margins trending down towards the 54% mark, albeit still a bit higher than the pre-COVID norm (52-53%). Overall, we see Jumbo as a mid-single digit top line growth story, but with fading gross margins likely to limit the EBIT growth CAGR to 23% total return. We add Jumbo back to our top picks.