Jeronimo Martins Stock Jumps as Biedronka's Margin Strength Offsets Sales Miss

Shares of Jeronimo Martins (ELI:JMT) surged by as much as 5% after the company reported second-quarter results showing its key Polish subsidiary, Biedronka, delivered stronger-than-expected profitability that offset a sales shortfall.

Biedronka's Mixed Results

Biedronka, Poland's largest food retailer and a crucial division for Jeronimo Martins, saw its like-for-like sales decline by 1.6% year-over-year, missing consensus analyst expectations of a 0.4% drop. The company attributed the weaker top-line performance to basket deflation.

However, investors focused on the unit's underlying profitability. Key figures from the report include:

• EBITDA came in 2.6% above consensus estimates.
• Margins expanded by 40 basis points compared to the same period last year.

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This robust margin performance was strong enough to mitigate the impact of the sales miss, driving positive sentiment for the stock.

Cautious Outlook and Group Performance

At the group level, Jeronimo Martins' EBIT and profit before tax were in line with market expectations. The outperformance from Biedronka's margins was balanced by higher-than-anticipated depreciation and amortization costs, according to the company's release.

Management provided a cautious outlook, noting a more challenging operating environment than previously anticipated. The company now expects deflation to persist for longer than it had forecast at the end of the first quarter. Consequently, management warned that the strong margin performance seen in the first half of the year may not be repeated to the same extent in the second half.