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Investing.com -- Shares of Jeronimo Martins leaped by 7% today after the company reported a stronger-than-anticipated first-quarter EBITDA, soothing investor concerns with its performance and outlook.
The positive sentiment was further bolstered by a conference call that provided reassurance about the company’s margin trajectory and competitive environment, particularly in its key market of Poland.
The Portuguese retailer, which operates the Biedronka chain in Poland, did not express overt caution on the call regarding its financial guidance. Analysts had been closely monitoring the Polish consumer environment, which has shown signs of stability with no further trading down, although improvements are yet to be seen despite an increase in disposable income.
This stability has been somewhat clouded by the complexities of analyzing volume shifts due to Easter timing and a leap year.
Despite a competitive landscape leading up to Easter, traditionally a period of heavy promotions, Jeronimo Martins did not signal that second-quarter margins would weaken as a result of seasonal mix changes. This outlook was supported by the fact that the company is lapping the introduction of food VAT from the previous year, which it had absorbed.
Moreover, there were no explicit downward revisions to the company’s full-year like-for-like sales growth, which is expected at around 3%, nor to the Biedronka’s forecasted margins, which are anticipated to remain relatively flat.
"An unexpected margin inflection last night is clearly cementing the idea in investors’ minds that the long-term algorithm of Poland-driven growth remains in place, with the probability of a consumer inflection in the country now seemingly higher than at any point in the last 12 months an additional kicker. We raise our price target to €23," Jefferies analysts wrote.
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