Jumbo sales growth impressive

Jumbo announced that 2008 sales growth for the financial year-end June, 2008 reached 17.88%, implying sales at EUR404mln. The revised guidance of the management called for sales at EUR402.3m (+17.4% y-o-y) and net earnings at EUR82.5m (+21.4% y-o-y). Moreover, Jumbo announced that its investment plan for network expansion continues with three new openings in the first semester of fiscal year June 2008 – June 2009, which are already included in our estimates. Finally, Jumbo announced that it has acquired one more plot in Bulgaria, reaching three land plots in Bulgaria. Although the news comes as no surprise, they reassure analysts positive view and the good prospects of the group despite the challenging business environment.

4Q08
With sales growth already communicated at 31% y-o-y, Citigroup analysts say their focus is on EBITDA margin expansion (100bps) for Jumbo to meet their 36% net income growth forecast for 4Q08. Recently the CEO said the target of 21.5% growth on net income for FY08 is feasible (Citi estimates are at 23%).
Since Greece has had snap elections, devastating fires, a summer heat wave, a fire in a Jumbo store, truck drivers’ and ongoing port strikes, Citi analysts view this expected growth as extremely impressive. Despite these factors, Jumbo improved margins, delivered 10-12% LFL sales growth, opened two new stores, and is on track for three new stores in 1H09. Promahonas store (5-6K sqm) already opened on a “trial mode” with two new openings in Athens most likely before September, ahead of school openings.
While Citi have reduced their price target on Jumbo to EUR25 from EUR27, they maintain their buy recommendation, supported by 6% LFL sales growth in 2009E vs. 10-12% in 2008E and 10-12% capacity expansion. Citi’s EPS growth of 20% over 2008-10E is based on cautiously declining EBITDA margins. A 1% change in LFL growth has 1.5-
2% sensitivity on the group’s EPS, on our estimates. “We remain strong buyers— on our new target price the shares would trade on 15.9x PE 2009E or 13.4x PE 2010E.” conclude Citi analysts.