EUR 300.00 For Business Accounts Only

JUMBO | “Under-promise and over-deliver”

Jumbo’s growth story continues unfettered, with the group delivering c8% revenue growth in FY19, in line with the average in the last 6 years. Top line has been driven by a combination of store expansion and like-for-like growth, both of which are poised to continue. With the Romanian expansion set to add c16% to Jumbo’s capacity in the next 4 years, Greek macro accelerating and foreign markets’ GDP growth profile appearing resilient (>3%), we argue there is reasonable degree of visibility regarding Jumbo’s growth through to FY22e. We thus contend that group revenue growth will remain in the high single-digits in the near term and view mgt’s guidance as part of the “under-promise and over-deliver” business philosophy.

The relatively high visibility regarding top line growth filters through into high single digit EBIT CAGR predicated on little-changed margins, as we expect any potential gross margin erosion to be offset by cost leverage. Most importantly, our estimates suggest that the new stores open at high productivity, thus without diluting returns on capital. We expect this to continue – especially as there are still c15 cities in Romania with >100K inhabitants where Jumbo is not present – thereby leading to a c260bps uplift in pre-tax ROIC (to c27%) by 2027. In our view, earnings risk lies more to the upside, especially if LFL trends in Greece strengthen to 4-5% (vs. c2% incorporated in our model) as cyclical momentum accelerates.

In this note we make trivial changes to our estimates slightly increasing our PT to €19.6. We also present pro-forma December financial statements (as Jumbo intends to switch to a December year-end) and update our model for IFRS 16 (with marginal impact on the P&L).