Jerónimo Martins: A soft end to a tough year in Poland
JMT’s Q4 sales rose 4.3% YoY, largely in line with our forecast and BBG consensus. However Biedronka’s LfL, at 1.2%, was a small miss to HTGe (2.0%) and consensus (1.4%) despite higher basket inflation (0% vs HTGe -1.3%) and this may raise some eyebrows as it could signal a strategic shift towards margin protection instead of top-line growth. JMT told us that the weight of products sold at a promotion was broadly stable QoQ and that the higher basket inflation was mostly driven by a recovery in the prices of sugar and fruit & vegetables that impacted its basket more than food CPI. We would also remind that in 4Q17 Biedronka had notably stepped up price investment and thus the price comp was much easier than in Q3. In Portugal, Pingo Doce’s LfL (2.8% vs. HTGe 2.0%) and Recheio’s (6.6% vs. HTGe 4.0%) have again beaten our estimates. Finally, in Colombia revenues were 4% below our forecast largely on softer sales densities. JMT highlighted several times in the trading statement that it has managed to balance growth with profitability and this led us to make very few changes to our numbers. We are in line with consensus and we expect earnings momentum to become more neutral this year after a quite negative 2018. We have a SB BUY rating with a Eur15.2 FV.Jeronimo Martins S.G.P.S. is a holding company. Through its subsidiaries, Co. is engaged as a food distribution company with operations in Poland and Portugal. Co. operates in four segments: Portugal Retail, which comprises the business unit of JMR - Gestao de Empresas de Retalho, SGPS, S.A. (Pingo Doce supermarkets); Portugal Cash & Carry, which includes the wholesale business unit Recheio; Poland Retail, which includes the business unit with the brand Biedronka; and Others, which includes marketing services and representations, restaurants in Portugal, health and beauty retail in Poland, and its retail business in Colombia.
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