Jumbo SA
ATHEX:BELA
Jumbo SA
Jumbo SA, a Greek retail giant, began its journey in the 1980s as a small toy shop founded by businessman Apostolos Vakakis. It wasn't long before it expanded beyond the confines of a niche toy store, slowly evolving into a multi-category retailer. Today, Jumbo is a household name, renowned for its diverse product range that encompasses toys, seasonal items, home goods, stationery, and more. The company's ability to adapt to market shifts and consumer trends has been crucial to its sustained growth. By capitalizing on its well-established brand and maintaining competitive pricing, Jumbo has carved out a sizeable share of the retail market in Greece and other countries.
The operational model of Jumbo hinges on sourcing a wide variety of inexpensive products, which are largely imported from cost-effective manufacturing hubs like China. The company optimizes its procurement strategy to keep costs low while ensuring a broad assortment, thus appealing to price-sensitive customers. Retail stores, strategically placed in high-traffic areas, are designed to create a vibrant shopping experience that encourages browsing and impulse purchases, boosting sales volumes. Meanwhile, their growing e-commerce platform has enabled them to tap into the online shopping trend, extending reach to new customers and rejuvenating the brand's appeal in the digital age. Overall, Jumbo's blend of strategic store locations, efficient supply chain management, and an evolving product mix are key ingredients to its revenue generation recipe.
Earnings Calls
Jumbo Group reported an impressive 8% sales growth in the first half of 2024, reaching EUR 460 million, while EBITDA rose by 12% to EUR 165 million. Their net profit increased by 14% to EUR 122 million. Despite ongoing supply chain disruptions, particularly due to the situation around the Suez Canal, they sustained a stable gross margin of 55%. Looking ahead, the company anticipates a slower growth rate of approximately 4% for the remainder of 2024. A capex budget of EUR 60-65 million is allocated for expansion, with plans for new stores in Nicosia and Bucharest.
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Ladies and gentlemen, thank you for standing by. I'm Constantino, Chorus Call operator. Welcome, and thank you for joining the Jumbo Conference Call and live webcast to present and discuss the First Half 2024 Financial Results. [Operator Instructions] The conference is being recorded. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Apostolos -Evangelos Vakakis, Chairman of the Board of Directors; Mr. Polys Polycarpou, Executive Director; and Ms. Karamitsoli Amalia, Head of Investor Relations. Ms. Karamitsoli, you may now proceed.
Thank you, [indiscernible]. Hello, everyone. Thank you for taking the time to join us today. I'm excited to present our performance highlights and the future for Jumbo Group. Let's start with a few key financial results for the first half of the year. We achieved sales growth of 8%, reaching EUR 460 million. Our gross margin remained flat at 55%, representing stable operations despite the challenging market. EBITDA increased by 12%, totaling EUR 165 million and adjusted EBITDA grew by 5% to EUR 164 million.
In terms of profitability, net profit increased by 14%, reaching EUR 122 million and an adjusted basis, net profit increased by 5% to EUR 111 million. We are in a strong financial position with net cash excluding [indiscernible] million, and capital expenditure for the period of EUR 35 million position us well to execute our investment plan. A cash distribution of EUR 0.6 per share in March, a dividend distribution of EUR 1 per share in July as well as the recent approval of a share buyback program, further reflecting our commitment to delivering value to our shareholder partners.
Looking to our operations in the first half of the year, we successfully launched our second store in Oradea, Romania and we have reopened the two stores in Greece, that were closed in September of 2023 due to the effects of the Daniel storm. In terms of store presence of Jumbo now operates 53 stores in Greece, [ flat ] online Store, 5 stores in Cyprus and also the online store, 10 stores in Bulgaria and 18 stores in Romanian [indiscernible] online stores. Through partnerships, we now have presence with 37 stores being the Jumbo brand in 7 countries. Israel also started the second franchise store in September 2024.
Looking at group sales in the first 8 months of 2024, we achieved a 7% increase with the following highlights. Group sales grew by 7%, Cyprus, slight increase by 1%. Bulgaria sales rose by 9% and Romania experienced strong growth with sales up 13% year-on-year.
Looking ahead to store expansions, we are opening a new hyper-store in [ Nicosia ] in October, and another hyper-store in Bucharest is scheduled for November 2024. A second hyper-store in Timisoara is planned for 2025, along with one more store in Romanian next year. For 2025 pending availability, one more store is expected to open in one of the countries of operations.
Last, but not least, I would like to note that the hyper-store in Cluj-Napoca is planned for 2026. Now regarding our 2024 budget, we have announced that we anticipate sales growth at [ 4% ] and organic net income that was [indiscernible] with 2023 levels.
We have allocated CapEx of approximately EUR 60 million to EUR 65 million, subject to the rollout of department stores. In our budget, we have also encountered persistent delays in product deliveries due to ongoing situation in [indiscernible]. This has affected the global supply chain throughout 2024.
In closing, our strong financial position continues our expansion and commitment to shareholder value, give us confidence as we move forward. Thank you for your attention. And now Mr. Apostolos-Evangelos Vakakis, who will take your questions.
Good afternoon. Welcome to Jumbo Conference Call.
[Operator Instructions] The first question comes from the line of Nekrasov Maksim with Citi.
I have a question regarding the buyback and dividends. So how do you think about shareholder remuneration in case the share price goes above the upper end of the buyback range as it's already above EUR 26? And can shareholders expect another dividend near term in addition to the buyback that you announced?
By default. This will come by default, but not as instantly as people may think due to the fact that we will have to see the overall development of the market as well as the situation with a war in Lebanon and the area around there.
I have a couple more, maybe just have one. On your budget, 2024 budget and outlook, so why do you expect to see a slowdown in the coming months based on your guidance considering that year-to-date growth has been around 7% and 8% in the first half. So what drives slower growth in the remaining months?
The fact is that due to the continuation of hostilities in around the Suez Canal. We now face a situation of major disruption in our supply chain. As a result of that, we get rapid deliveries. And we have to make an assumption that somehow this will affect our day-to-day operation. So to cut a long story short, we have a cost of war situation that needs to be reflected somewhere. And this is what we have done with our guidance.
[Operator Instructions] Ladies and gentlemen, there are no audio questions at this time. And we will now move to our webcast questions. The first webcast question comes from Iakovos Kourtesis with Piraeus Securities. "Since we are towards the end of September, would you be kind enough to provide us group's top line performance for September and for the 9-month '24 period as well as on a per country basis for both September and the 9-month periods?"
September has not finished yet. So it is very difficult to put a number and a detailed number without the period finishes. We usually publish the September results early October. If one wants to -- just to get a smell of what goes on, we have said that our September overall results will be sliding towards the 4% that we have already warned the market, although still the pace doesn't look as alarming.
The next webcast question is a follow-up question from Iakovos Kourtesis. Would you expect your gross profit margin for the full year period to settle at previous year's levels, 55.8%.
It's anybody's guess, but we would be disappointed if it doesn't.
Next question is again from our webcast participants. Iakovos Kourtesis. "Do you have available any estimates for your market share on a per country basis."
Absolutely none. We don't really think in these terms. Our strategy is growth, growth, growth. And theoretically, all markets assuming normal conditions should be still on a growth path.
The next question is from our participant Lukas [indiscernible] and I "can you comment on the outlook? Can you also comment on Israel, the fact that you opened a second shop is a good sign? What is the potential of this market outside short-term consents of the war?
The disposable income of Israel comparative to the Greek disposable income as well as the Balkan region income is minimum to almost 3x as big. So it is a positive reality. On the other hand, the operation in Israel is a franchised one. So everything depends on our business partners. We don't want to involve ourselves further into this exercise. But from what we hear, the plan is for an area that can generate as much turnover in the future as in Greece.
The next webcast question comes from Maksim Nekrasov with Citi,"what percentage of the cost of goods is comprised by transportation costs? What increase in shipping costs do you observe on average for your inventories? "
We have followed a strategy of only shipping goods that do not disturb the selling out as well as the cost structure, and we have refused to support any products that didn't fall within this category. Our personal feeling is that sooner or later, the situation around the Suez Canal will be settled because if it's not, that will have disproportionate effect in the medium and long run of the prosperity of continents and regimes. So I really don't fully understand the nature of the question.
But if I can make a guess, I would say that as we stand today, I'm a little bit more positive than negative that we are heading again, by default towards a normalization of problem.
The next webcast question comes from [indiscernible], "does your guidance for stable organic profits include or exclude the EUR 10 million insurance receipt?"
we have already reflected that on our numbers published -- and we have given these numbers for people to be in line with a one-off benefit. The way we see it is that we have a one-off benefit. And on the other side, a one-off detriment, which is the cost of war.
So theoretically, when the one has an effect subsides, hopefully, the other one would subside as well. So this is what creates to us, a percentage more opportunity that things would get better than worse. And I'm talking about '25, and I'm not talking about '24, that it's still too close to call. What will be the end number.
The next webcast question comes from Constantinos Zouzoulas with Axia Ventures Group, "Apart from the disruptions in Suez that could affect operations, how do you see overall demand evolving in the market Jumbo operates given the existing inflationary pressures?
Our feeling is, come what may. Singers will always sing. Dancers will always dance and consumers will always spend. Having said that, however, it is true that we face two challenges. One challenge is the birth rate in some of the countries that we operate. And the second challenge is, as I said, the cost of war directly through increased cost of transportation, and indirectly by logistical implications that again affect costs directly and indirectly, directly through the additional cost of going through Africa. And indirectly through an erratic behavior of how products are coming, how they get delivered, how they -- whether they are on time and so on. I think that answers your question.
The next webcast question comes from Gregory Randalls with [indiscernible] Partners, "do you believe Romania longer term can have 50 or more locations? Have you begun plans for the next country or too premature?"
I've said to people that I never plan more than 18 months forward. And this is something that I will keep, but common sense and pure mathematics says that in a country that is double the population of Greece, it is very realistic. One to expect to have the same turnover as in Greece.
The next webcast question comes from Roman [indiscernible] Capital, "what gross margin do you have on your sales to your franchise partners like in Israel?"
We have no gross margin charge. We only have an operational charge that covers our overheads. And then we take a cut of 4% on the turnover of the activity in the country.
The next webcast question comes from [ Giorgio Ricof ] with [indiscernible] Capital Management, "could you please share parameters of the franchise agreement in Israel and also other Balkan market, example, fees, duration, et cetera".
Everybody wants and likes to do business with us. The arrangement will have explained by Amalia. So we charge the cost of operations, which is our direct costs, and it contributes to our overhead costs. So for us, it is an export activity. And then as I said, we take 4% of the turnover irrelevant whether the operation is profitable or unprofitable.
[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Vakakis for any closing comments. Thank you.
Thank you very much for attending this conference. If one ask me about the future, I would say that I'm slightly more optimistic than that I used to be a few months back. But however, if one asked me, what is the future? I cannot give an answer which is objective. It would be subjective.
And therefore, the future for us is our budgeted numbers, which really is -- and the guidance is a byproduct of these budgeted numbers. And prudency always prevails to optimism. So we hope that conditions will not change that dramatically in order to affect a policy that has been consistent for the last 30 years.
All the rest is really guessing. But if one overlooks the cost of work, then, in my opinion, he's making a mistake. So in comparative terms, Jumbo would be excelling against its competitors. But on real terms, on arithmetic terms, we are not that big or that serious to affect markets. So this is the reality, and we have to stay without the dimensions and equilibrium that we operate in. So better be pleasant, than sorry.
Mr. Vakakis, excuse me to interrupt you. Yes, we do have a few more webcast questions. The next webcast question comes from Zara Coombs with Lazard, "how do you view the competitive threat of action and also Amazon entering Romania?".
Not bother to us this thing. The market is so big. Our assumptions are so prudent that take account of the possibility of facing in the future, tremendous competition. Competition is a healthy thing because it also helps our company to gain customers everywhere around by seeing what our competitors are doing. I never bothered so much worrying about competition. I was always very interested to see what competitors were doing in order to be strong competitors. And to me, hoping an action makes sense, if it is a better one to us.
The next webcast question comes from George Athanasakis with Pantelakis Securities, "are other franchise agreements similar to Israel ".
We don't have the capacity to house additional new franchises into our system. We discourage focusing too much towards this activity. For us, this activity has been encouraged up to now due to the fact that the great economy, although theoretically healthy, it's still lagging in terms of modernization and competitiveness.
And therefore, any help we can get without visible cost or worries, financial worries is welcome, but it cannot interfere with our core business. So for us, it is a complementary activity. It is not an activity that we pay too much attention to towards or that we rely on in order to support our numbers in our business.
The next webcast question comes from Gregory Randalls from [indiscernible] Partners, "you mentioned copying action makes sense if they are doing something well. A key part of the strategy are smaller stores closer to city center. Is that something that can work within the Jumbo model?".
For us, no. The question is not whether you have smaller stores is of having more cost-efficient stores. And this is part of our strategy where we buy stores that we rent. We incorporate last minute delivery scenarios into the stores. So we changed the balance between warehouse and selling area of the stores. To us, this is a better and longer lasting strategy, which is to have destination stores rather than have what is called convenience stores which we leave this or deal to our competitors.
The next webcast question comes from [Giorgio Ricof ] with [indiscernible] Capital Management, "when does the inventory build up for Christmas season usually start in a normal year? And how have you adjusted working capital activities in light of the Suez Canal disruptions?".
We had no such need to devise a special strategy due to the fact that it was not in our call to do so. We refused to pay, let's say, black mail transport cost. And thank God, our strategy has paid because although we have disruptions, we don't have in our warehouse products, which are overpriced. And as recent events indicate of a gradual normalization of the supply chain. This strategy will pay results.
Now having said that, we may face different types of problems in the future. But this is what we are paid to do to address problems in a way that does not change the model that we have, and we do not compromise the model in order to buy turnover or to create short-term profits which are not sustainable.
[Operator Instructions] Yes. Ladies and gentlemen, there are no further questions at this time, Mr. Vakakis, the floor's back to you. Thank you.
So good afternoon. Thank you for listening to us. And hopefully, our guidance as it moves towards December will guide you to understand what exactly we have done in our strategy because we cannot really explain the strategy in further details because not only we copy, but we are copied. Good afternoon.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling. Have a good afternoon.