Jeronimo Martins shares tumble on weaker core margins

By Sergio Goncalves and Matteo Allievi

LISBON (Reuters) - Shares in Portuguese retailer Jeronimo Martins fell more than 18% on Thursday, on track for their biggest daily decline, after it reported first-half margin weakness and warned that this could worsen in the coming months.

The group said its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) over the period decreased to 6.4% from 6.9% a year earlier.

Chief Executive Pedro Soares dos Santos said that "2024 has been marked, after an inflationary cycle, by the harsh effects resulting from a sharp correction in food prices and a significant cost increase" and that he expected this to continue in the second half of the year.

J.P.Morgan analysts said they were "cautious" on the outlook for the second half.

The margin at its market-leading Polish chain Biedronka fell to 7.6% from 8.5%.

Finance chief Ana Luisa Virginia told a conference call that Polish consumers are being more cautious with their spending given an uncertain economic backdrop.

"The lack of consumer dynamism has also contributed to the noticeable intensification of competition in the food market," the group said, referring to its Polish business.

Virginia added that the group expects a deflationary environment to continue in the second half of the year.

Jeronimo Martins' net profit dropped 28% year on year in second quarter to 156 million euros ($169 million) as a decline in margins from food price deflation offset higher sales at Biedronka.

Consolidated second-quarter sales rose 6.8% to about 8.2 billion euros, helped by a 5.7% increase at Biedronka, where sales reached around 5.8 billion euros.

However, Biedronka's like-for-like sales in Polish zlotys fell by 4.6%, having risen by 4.6% in the previous three months.

At home, sales at the Pingo Doce supermarket chain rose 3.7% to 1.2 billion euros while in Colombia its Ara stores booked 721 million euros in sales, up 22% from a year earlier.

($1 = 0.9214 euros)

(Reporting by Sergio Goncalves and Matteo Allievi; Editing by Charlie Devereux, Diane Craft and David Goodman)