(Bloomberg) -- Jeronimo Martins SGPS SA tumbled by the most since 2008 after the owner of Poland’s biggest grocery chain reported the first decline in same-store sales in five years, dashing bets on a rebound of consumer demand.
The Lisbon-listed company’s shares dropped as much as 19% on Thursday to the lowest level in three years, triggering a slump in other Poland-focused retailers. Dino Polska SA dropped 12%, Eurocash SA 8.9% and LPP SA 3.3%.
The results, along with J. Martins pledge to continue with its policy of offering price discounts in a bid to lure clients, are undermining investor bets on a revival of Polish consumer demand as the European Union’s biggest eastern economy recovers high inflation. Consumer stocks have been among this year’s top picks by local brokerages amid fast-growing wages and rising social benefits.
“We are conscious that a sharp reduction in food inflation will effect the top line in our balance sheet and that together with already high costs will hamper earnings for the year,” J. Martins Chief Financial Officer Ana Luisa Virginia said. “As such, we will keep including competitiveness and efficiency as a way to protect our business fundamentals.”
Throughout 2024, J. Martins’ nearly 3,600 Biedronka-branded stores have been in a fierce price war with German competitor Lidl, which has hit margins. Additionally, Biedronka has maintained prices of basic groceries unchanged for some time following an increase in the VAT tax rate on food.
J. Martin’s net income dropped 28% year-on-year to €156 million ($169 million) in the second quarter, missing the consensus estimate of €167 million. Biedronka’s like-for-like sales dropped 4.6% from a year earlier, three times more than expected by analysts.
The company’s shares traded 18% lower at €16.01 as of 11:11 a.m. in Lisbon. Warsaw’s WIG20 stock index declined 1.8% to a one-month low.
Polish non-food discount retailer Pepco Group NV has also reported negative same-store sales dynamics, casting doubts over the country’s economy. Ernest Pytlarczyk, the chief economist at Bank Pekao SA said that Poles may be focused on rebuilding their savings accounts, instead of boosting consumption, in the wake of a two-year long spike in inflation.
“Expectations for a consumer boom have not materialized,” he said.
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