Jerónimo Martins: EBITDA Up 7.6%, Net Profit Down 3.5%, and No Conservative Margin of Safety

Cash flow is the second live debate. The company reported H1 cash flow of negative EUR 332 million after EUR 1.235 billion of EBITDA because capitalised lease payments absorbed EUR 214 million, interest EUR 187 million, tax EUR 63 million, cash payments for capex and financial investments EUR 591 million, and working capital EUR 504 million. Accounting capex recognised for the half was only EUR 412 million, so the EUR 591 million cash-investment figure also reflects payment timing and other investment movements. The cash strain is real; the evidence does not support treating it as a solvency problem. A grocery business with EUR 11 million of ex-IFRS-16 net cash can absorb a seasonal working-capital outflow, but a repeat of a EUR 500 million working-capital drain at the full-year level would make the equity story materially less attractive.

The competitive picture blocks any simple “deflation will pass” thesis. Biedronka remains Poland's largest grocery retailer and generated about PLN 108 billion of turnover in 2025, but Dino has expanded from roughly 1,200 stores in 2019 to around 3,000 by the end of 2025; Lidl continues to compete directly on discount pricing and private label; Kaufland competes for larger-basket traffic; and Żabka controls a dense convenience network of roughly 13,000 stores. Żabka is itself entering a new phase: Alimentation Couche-Tard launched an acquisition process in 2026, potentially bringing a much larger international convenience operator's procurement, systems and capital behind the Polish chain.

Biedronka's advantage is therefore not a monopoly and not consumer captivity. Its customers can switch stores at negligible cost. What it does have is density, purchasing scale, logistics, store productivity, a deeply embedded low-price brand and an enormous flow of grocery volume through a relatively standardised format. Those features let it run promotions and procure inventory at costs smaller chains have trouble matching. The weakness of that moat is visible whenever Lidl, Dino and others force a price battle: Biedronka can defend traffic, but defending traffic can transfer part of the economic benefit to customers. The moat protects volume and market position better than it protects every basis point of margin.

The capital-markets question is whether Biedronka can convert healthy volumes into nominal growth without surrendering the margin gains achieved during deflation. If Polish food inflation returns gently toward low positive territory, the setup becomes favourable: volumes are already growing, procurement has reset lower and nominal comparable sales can reaccelerate. If food deflation persists while Dino and Lidl keep promotional intensity high, sales density remains weak even with respectable physical volumes, and labour, energy and rent costs continue to increase in nominal terms. The first path restores operating leverage; the second gradually eats it.

The market has already shown how sensitive it is to this distinction. Jerónimo Martins shares rose through 2021–2023, ending those years at EUR 20.10, EUR 20.18 and EUR 23.04 respectively, then fell 19.9% in 2024 to EUR 18.45. On July 25, 2024, the shares closed 16.6% lower after trading as much as 19% down intraday, following quarterly results exposed weak Biedronka comparable sales and margin pressure. The stock recovered 9.8% in 2025 to EUR 20.26, but by August 28, 2026 had fallen back to EUR 17.97, about 11.3% below the 2025 year-end close and roughly one-third below its highest 2023 close of EUR 26.86. In March 2026 alone, the shares fell 6.59% after full-year results as investors focused on deflation, energy uncertainty and the difficulty of maintaining margins.

That history sends a consistent message. Investors once priced Jerónimo Martins as a relatively scarce listed vehicle for structural Polish discount-retail growth, and the company then had to prove that growth could survive the transition from inflation-supported nominal sales to deflation, wage inflation and heavier competitive investment. At EUR 17.97 the stock no longer carries the kind of valuation that would reasonably be called a bubble: trailing reported P/E is approximately 17.8 times on trailing attributable earnings of about EUR 637 million, while trailing ex-IFRS-16 earnings imply approximately 16.1 times. Consensus 2026 EPS around EUR 1.077 implies about 16.7 times forward earnings. Those are above several mature European grocers, but well below Dino Polska's growth multiple.

The bull/bear disagreement is therefore narrower and more concrete than “Polish grocery good or bad.” Bulls can point to Biedronka's roughly 5% H1 volume growth, EBITDA margin expansion despite basket deflation, Ara's accelerating scale economics, a clean ex-lease balance sheet and a valuation below Jerónimo Martins' recent average. Bears can point to essentially zero Biedronka LFL growth, H1 negative cash flow, higher financing expense, a very aggressive Polish competitive environment, approximately EUR 1.2 billion of planned 2026 investment and a share price that still assumes the business earns materially more than a low-growth supermarket. Both sides have real evidence.

Vertical history and financial architecture

Jerónimo Martins began far from the modern capital market. The company's own history traces the business to 1792, when Jerónimo Martins, a young Galician merchant, opened a modest store in Lisbon's Chiado district. The continuity with today's group is grocery and household consumption; almost everything about the economic system around it has changed. The merchant operation eventually became a multi-banner retail and distribution group built around centralised procurement, logistics, private-label development and thousands of stores.

The public-market transition came in 1989. Jerónimo Martins says admission to the Lisbon stock exchange occurred in November 1989, and its own retrospective describes the opening of capital as a way to reorganise ownership while financing ambitious domestic and international expansion. A Portuguese issuer-history source says an IPO of 15% of the company's capital took place a few months before the listing at an announced price retrospectively expressed as EUR 16.5 per share. Because the euro did not exist as circulating currency in 1989, that figure should be read as a converted historical reference rather than as a directly comparable nominal quotation. I did not find a reliable primary disclosure of total IPO proceeds in the currently accessible archive, so I do not manufacture a “capital raised” figure.

The listing matters less for the company's strategic identity than the ownership continuity does. Sociedade Francisco Manuel dos Santos, the Soares dos Santos family holding vehicle, owned 353.261 million Jerónimo Martins shares at the end of 2025, representing 56.14% of capital and voting rights. The free float coexists with effective family control. In practice, management can invest through a multiyear cycle without depending on quarter-to-quarter activist approval, and it can sustain a long-payback venture such as Ara. Minority investors also have limited ability to redirect capital allocation if they disagree with the controller.

The modern Jerónimo Martins story reads better as five stages than as a year-by-year chronology.

The pre-listing and capital-opening stage was about turning a historic merchant and food business into a scalable corporate group. The 1989 flotation broadened the funding base and provided a listed currency for expansion. The company's own thirty-year stock-market retrospective says that, between listing and 2019, market capitalisation increased more than thirtyfold, the geographical footprint expanded from one country to three, the group surpassed 4,200 stores and annual sales increased by roughly EUR 18 billion. The success of the listing should therefore be judged primarily by what the capital funded rather than by the IPO-day valuation.

The decisive Polish entry stage arrived in the mid-1990s. Biedronka itself dates the first store to 1995 and says Jerónimo Martins acquired Biedronka in 1997; its historical material also records Jerónimo Martins' 1995 acquisition of the Polish Eurocash business. The strategic insight was powerful in hindsight: Poland had a large population, an underdeveloped modern grocery network and room for a dense discount format. Biedronka would ultimately become more economically important to Jerónimo Martins than its Portuguese home market.

The 1990s international push was broader than Poland, and the rest of it is a less flattering part of the capital-allocation history. Jerónimo Martins experimented beyond its eventual core and later pruned businesses that did not earn a durable place in the portfolio. The company's modern identity was shaped as much by narrowing its focus after overexpansion as by opening stores. What survived was a portfolio in which Portugal provided cash and operating knowledge while Poland became the scale-growth engine.

The Polish scale-compounding stage then turned Biedronka from an acquisition into an operating system. Store density increased, procurement volumes grew, distribution capacity followed the estate, private-label penetration strengthened and the discount proposition became nationally recognised. Scale was self-reinforcing in a way that ordinary “same-store sales” statistics understate: every additional cluster of stores allowed distribution assets and local advertising to be spread over greater volume, while increasing buying power with suppliers. This period created the cost-and-density advantage that still supports the equity thesis.

The portfolio-extension stage added a second long-duration growth experiment through Colombia's Ara and expanded specialised retail through Hebe. In strategic terms, Colombia repeats part of the old Polish playbook: enter a fragmented grocery market with a discount/proximity format, add stores and distribution centres before margins fully mature, and allow density to improve procurement and logistics economics. The comparison should not be pushed too far. Colombia has different consumer behaviour, infrastructure, currency volatility and local competitive conditions; Biedronka's Polish success does not guarantee an Ara replay.

The current stage began when inflation stopped doing part of the retailer's nominal-growth work. Through 2022–2023, European food inflation lifted nominal grocery revenue even when consumers were price-sensitive. By 2024, Polish food deflation and intense promotions exposed the distinction between unit volume and euro sales. Jerónimo Martins' 2024 annual-report archive itself characterises the year as one in which food deflation coincided with high cost inflation, especially labour costs. The stock's 19.9% full-year decline and its 16.6% one-day sell-off after July 2024 results show how abruptly the capital market repriced that transition.

The strategic response has been to keep investing rather than protect short-term cash flow. In 2025 Biedronka entered Slovakia; by year-end it had 15 stores there, with the company reporting around half of assortment sourced locally and private brand representing roughly 44% of the offer. H1 2026 added two more Slovak stores. At the same time the group kept expanding Ara and the Polish estate rather than treating deflation as a reason to halt growth capex. That is the kind of decision a controlling family can sustain more easily than a management team optimising for near-term free cash flow, but it increases the need to measure returns on incremental investment rather than applauding store openings by themselves.

The leadership structure reinforces that long horizon. Pedro Soares dos Santos has spent decades inside the group, including operational responsibility in Portugal and Poland, has served as a director since 1995, became CEO in 2010 and chairman in 2013. The combination provides unusual continuity and direct operational memory. It also concentrates authority because the chairman and chief executive roles are combined while the family remains majority owner. The board had 11 members after the 2025 annual meeting, 10 non-executives and seven directors classified as independent under the Portuguese governance criteria cited by the company.

That governance structure is a trade. Family control reduces the probability of strategy being whipsawed by short-term market pressure, and it can sustain investments that may take a decade to mature. The cost is that outside shareholders cannot force a faster dividend, an Ara retrenchment or a different chairman/CEO structure. Alignment is helped by the controller's enormous economic exposure to the ordinary shares and by a formal dividend policy, but control and alignment are not identical concepts.

The dividend policy is comparatively disciplined. Jerónimo Martins states a target payout of 40–50% of ordinary consolidated net earnings adjusted for IFRS 16. The 2025 annual meeting approved EUR 370.8 million, or EUR 0.59 per share, paid in May 2025. For 2025 earnings, the board proposed roughly EUR 408.5 million, or EUR 0.65 per share, approximately 50% of ordinary ex-IFRS-16 earnings; H1 2026 cash-flow disclosure reflects the dividend payment. At EUR 17.97, EUR 0.65 equates to a trailing indicated yield of about 3.6%. The policy leaves enough profit retained for store and logistics expansion while giving shareholders a recurring cash return.

The five-year record shows why the company earned its quality reputation, and why cash and capital intensity now deserve more attention.

Source: Jerónimo Martins FY2025 annual-report five-year financial summary.

Sales grew approximately 72% in four years, but the EBITDA margin fell from 7.6% to 6.9%. That is not evidence that scale has stopped working; it reflects a mix of high inflation, labour pressure, competitive pricing, geographic investment and leasing economics. The financial-result line tells you more: net financial expense more than doubled from EUR 154 million in 2021 to EUR 322 million in 2025. Net income compounded at a much slower rate than revenue. The equity story has moved from a nearly pure operating-growth question toward a capital-intensity question.

Working capital is structurally favourable over the long run because grocery customers pay immediately while suppliers are paid later. Jerónimo Martins reported negative working capital of EUR 3.290 billion in 2021 and EUR 4.577 billion in 2025. This supplier-funded structure is valuable, but it also makes individual half-year cash-flow periods noisy: a change in inventory purchases or creditor timing can produce a large cash swing even when the economic business has not changed much.

FY2025 illustrates both sides. Operating cash flow after tax was about EUR 2.425 billion, aided by roughly EUR 550 million of cash generation from creditors. Cash spending on tangible and intangible fixed assets was approximately EUR 1.057 billion, lease interest absorbed EUR 279 million and lease principal EUR 409 million. A conservative free-cash-flow proxy after capex and those lease cash costs is therefore about EUR 680 million: EUR 2.425 billion minus EUR 1.057 billion minus EUR 279 million minus EUR 409 million. That happens to equal roughly 6.0% of the current EUR 11.31 billion equity value.

The same calculation for 2024 gives only about EUR 22 million because operating cash flow was EUR 1.654 billion against EUR 1.005 billion of capex, EUR 235 million of lease interest and EUR 392 million of lease principal. That enormous year-to-year swing is why a single year's “FCF yield” is a poor valuation anchor for Jerónimo Martins. The business converts earnings to cash over time, but negative working capital and store-investment phasing move cash between periods.

For 2022–2025, the operating-cash-flow/net-income ratio is approximately 3.16 times using reported operating cash flow of EUR 2.095 billion, EUR 2.025 billion, EUR 1.654 billion and EUR 2.425 billion against attributable net income of EUR 590 million, EUR 756 million, EUR 599 million and EUR 646 million. That superficially looks extraordinary; it should not be interpreted as “earnings quality three times better than accounting profit.” Grocery supplier financing and the presentation of lease costs outside operating cash flow elevate the ratio. A literal five-year 2021–2025 ratio could not be completed from an equally comparable primary cash-flow series obtained during this research pass, so the four-year calculation is presented rather than filling the gap with an estimate.

The EBITDA-to-profit divergence is principally financing and lease accounting, not operating deterioration. IFRS 16 removes store rent from operating expense before EBITDA, then returns lease economics partly as depreciation and partly as interest. H1 2026 shows EUR 1.235 billion of reported EBITDA but only EUR 879 million ex-IFRS-16 EBITDA. The corresponding margins are 6.8% and 4.8%. Biedronka alone reported an 8.0% IFRS-16 EBITDA margin and about 6.1% ex-IFRS-16. Analysts comparing Jerónimo Martins with a retailer that owns more real estate or reports a differently adjusted lease measure should use consistent EV and EBITDA definitions.

Run an internally consistent valuation and the same point appears. Trailing-twelve-month EBITDA through H1 2026 is roughly EUR 2.567 billion using FY2025 less H1 2025 plus H1 2026. Adding H1 reported net debt of EUR 4.430 billion to current equity value produces an enterprise value of about EUR 15.74 billion, or roughly 6.1 times reported EBITDA. Excluding IFRS 16, trailing EBITDA is approximately EUR 1.872 billion and the company had EUR 11 million of net cash; that produces an ex-lease EV/EBITDA near 6.0 times. The apparently much larger EBITDA on the IFRS-16 basis is counterbalanced by the lease liabilities added to enterprise value.

Returns on capital need care. Ordinary ROE is boosted by the group's negative working-capital model and relatively small accounting equity base. A lease-adjusted ROIC calculation is more economically useful, but the annual-report summary does not disclose a single canonical measure. What can be said directly is that invested capital grew from about EUR 3.852 billion in 2021 to EUR 6.831 billion in 2025 while EBIT rose from EUR 840 million to EUR 1.338 billion. The business has been reinvesting heavily enough that the marginal-return question increasingly matters: future shareholder value depends on new Polish, Colombian and Slovak capacity continuing to produce returns that exceed the cost of capital.

The price record tracks that evolution.

Sources: Jerónimo Martins annual-report share-price history and company investor page; 2026 move calculated from those closes.

The 2021–2023 advance coincided with rapid nominal sales growth, Polish expansion and an environment in which inflation helped reported grocery sales. The violent 2024 de-rating occurred when investors learned that food deflation could drive negative comparable sales even as wage and operating costs remained inflationary. The July 2024 session in which JMT closed 16.6% lower crystallised the market's fear: Biedronka's Q2 like-for-like sales fell 4.6% and quarterly net profit dropped sharply, undermining the old assumption that grocery defensiveness automatically meant smooth earnings.

The 2025 rebound was incomplete. Full-year sales and EBITDA hit new highs, yet JMT rose only 9.8% and the broader Portuguese market did considerably better. In 2026, the shares gave back that recovery as Biedronka moved back into deflation and management warned that energy and fuel uncertainty could make margin defence difficult. The stock's current approximately 17–18 times earnings multiple is therefore a compromise between two historical identities: a structural Polish growth retailer and a mature European grocer.

Business model, moat, industry and competitive landscape

The operating portfolio looks diversified on a map and concentrated in economics.

The company reports foreign operations using constant-exchange-rate growth as well as euro-reported growth. I use those company constant-currency measures rather than translating banner sales with an August 2026 spot PLN/EUR or COP/EUR rate, which would be the wrong exchange rate for six months of income-statement activity.

Biedronka is the profit engine. H1 EBITDA was EUR 1.003 billion, up from EUR 956 million, and its margin rose from 7.7% to 8.0%. Against group EBITDA of EUR 1.235 billion, Biedronka contributed more than four-fifths before the holding-company and other negative line. It is at once Jerónimo Martins' greatest strength and its greatest concentration risk.

Pingo Doce is a mature Portuguese supermarket operation that is growing faster than Biedronka's nominal Polish sales at present. H1 sales rose 5.3% to EUR 2.668 billion and LFL excluding fuel was 3.7%; EBITDA reached roughly EUR 150 million at a 5.6% margin. Pingo Doce lacks Poland's remaining white-space expansion, but it supplies meaningful cash generation and shows that current group weakness is not a Portugal-wide consumer problem.

Recheio, the Portuguese cash-and-carry operation, is smaller but stable, with EUR 673 million of H1 sales and a 5.0% EBITDA margin. Its economics depend more on hospitality, professional food service and independent trade than Pingo Doce's household grocery traffic, giving the Portuguese portfolio some end-market diversification.

Hebe is economically tiny next to Biedronka but has attractive reported margins: H1 sales were EUR 312 million, EBITDA EUR 26 million and the IFRS-16 margin 8.3%, versus 6.2% a year earlier. Ex-IFRS-16 EBITDA, however, was only about EUR 7 million at a 2.1% margin, a useful reminder that leased specialty stores can look deceptively profitable at headline EBITDA.

Ara is where the portfolio's optionality lives. H1 sales rose 30.2% in euros to EUR 1.995 billion and 21.1% in local currency, with 6.8% like-for-like growth. The gap between reported and constant-currency growth means currency translation was highly favourable to euro sales. Operating performance improved as well: reported EBITDA rose from about EUR 60 million to EUR 92 million and margin from 3.9% to 4.6%. Ex-IFRS-16 EBITDA reached approximately EUR 39 million at a 2.0% margin. The business is still far less profitable than Biedronka, but the direction of travel is consistent with density beginning to pay for the Colombian logistics network.

One of the research brief's starting facts needs correcting. The company's H1 2026 EBITDA bridge does not show “Recheio +EUR 26 million” and “Ara -EUR 10 million.” The primary presentation attributes about EUR 49 million of the year-on-year bridge to Biedronka, EUR 8 million to Hebe, EUR 11 million to the Portuguese food-distribution businesses, EUR 26 million to Ara, negative EUR 10 million to Others and positive EUR 4 million to currency translation, subject to rounding. Reported Ara EBITDA itself rose by approximately EUR 32 million.

So the proposition that “currency translation turned Ara's EBITDA contribution negative” fails the primary-source test. Currency was visibly favourable to Ara's euro sales, since +30.2% reported growth exceeded +21.1% local growth, but the operating bridge shows Ara making a positive EBITDA contribution before the separate group currency item. The negative EUR 10 million belongs to Others. This is more than housekeeping: the corrected data make the Colombian scaling story stronger than the research brief's starting premise suggested.

Colombia also does not appear to be treated by Jerónimo Martins as a hyperinflationary economy under IAS 29. IAS 29 applies to financial statements whose functional currency belongs to a hyperinflationary economy, with indicators including a cumulative three-year inflation rate approaching or exceeding 100%. Jerónimo Martins' FY2025 accounting-policy material reviewed here does not identify an IAS-29 restatement for Colombia, and H1 2026 reporting presents Ara through ordinary reported-versus-constant-exchange-rate growth. I therefore read the Colombian numbers as foreign-currency translation, not hyperinflation accounting.

The cost structure explains why food deflation has an asymmetric effect. Merchandise procurement is variable, and falling purchase costs can improve gross margin if retail prices do not fall as quickly. Labour, store occupancy, logistics infrastructure, central overhead and much of distribution capacity are far less variable over a six-month period. Deflation can therefore lift the gross-margin percentage while lowering sales density and making fixed operating costs harder to absorb. H1 2026 is almost a textbook example: consolidated gross margin increased about 37 basis points while Biedronka's nominal LFL barely grew.

Store expansion adds another layer of operating leverage. H1 2026 brought 124 store openings and 115 remodels. Biedronka opened 38 stores in Poland, or 15 net, plus two in Slovakia; Ara opened 64, or 55 net; Hebe opened 18; Pingo Doce and Recheio each added one. New distribution centres opened for Ara in Medellín and Biedronka in southeastern Poland. Accounting capex was EUR 412 million, split approximately 53% toward Biedronka, 25% Pingo Doce, 10% Ara, 4% Recheio and 8% other uses.

Management expects around EUR 1.2 billion of investment for full-year 2026. This is not a maintenance-only retailer. The estate requires continual refurbishments, refrigeration and logistics spending, while new stores and distribution centres consume growth capital. The company does not disclose a clean “maintenance capex versus growth capex” split. The nearly one-for-one ratio of H1 remodels to openings, together with the new logistics assets, suggests that a meaningful part of capex is maintenance or productivity expenditure while another meaningful part funds expansion. In valuation, I therefore assume roughly 40–60% of a normal annual investment programme represents economically recurring maintenance/refurbishment needs rather than treating all capex as optional growth. That is an analyst assumption, not a company disclosure.

The moat is cost-and-density economics, not customer lock-in. A consumer can move from Biedronka to Lidl, Dino, Żabka, Carrefour or Kaufland without paying a switching cost. Biedronka's defence lies in being close to the customer, moving enormous food volume, procuring effectively, operating a dense distribution network and sustaining a credible low-price reputation. The evidence that this moat is real is its ability to grow physical volumes by roughly 5% in H1 2026 despite a highly promotional environment and heavy basket deflation. The evidence that the moat has limits is that nominal LFL was only +0.2% and competitors can force Biedronka to share its scale savings with consumers.

Poland's grocery market is mature in aggregate consumption but still dynamic in channel share. Industry growth does not depend on persuading Poles to start buying food; it comes from inflation, population and household spending trends, store-format shifts, consolidation, retail-space additions and modern chains taking business from weaker operators. Because definitions vary across market-research providers, I do not attach a false-precision 2026 market-size number. For scale, Biedronka alone generated roughly PLN 108 billion of 2025 turnover.

Biedronka's principal listed local challenger is Dino Polska. Dino has become what Biedronka cannot easily replicate without changing format: an extremely fast-growing small-town proximity chain with a tightly standardised greenfield rollout and a significant property component. Its estate grew about two-and-a-half times, from about 1,200 stores in 2019 to around 3,000 at the end of 2025. Investors pay more for that visible unit-growth runway, even though Biedronka remains much larger.

Lidl is a more direct economic rival. Both brands train consumers to expect low prices, private label, rapid assortment turnover and aggressive promotions. Lidl brings the procurement resources of the privately held Schwarz Group and can compete without reporting quarterly Polish margins to public investors, which buys it patience in a price war. Kaufland, also part of Schwarz, sits farther toward a large-format supermarket/hypermarket proposition and competes more for broad, stock-up baskets. Because Schwarz is unlisted, its operating disclosures are useful competitively but do not provide a directly investable valuation multiple.

Żabka serves a different customer job. Its thousands of compact convenience stores monetise immediacy, long opening hours and neighbourhood access rather than the lowest possible weekly-basket cost. Poland's restrictions on Sunday trading have historically made convenience formats and certain exempt stores strategically relevant when many larger food stores are closed. Polish government material traces the restrictions to 2018, with the rules subsequently tightening; the 2026 calendar still permits a limited number of designated shopping Sundays rather than unrestricted weekly Sunday trade.

The 2026 Couche-Tard bid raises Żabka's competitive significance. Alimentation Couche-Tard offered roughly PLN 32 per share in a transaction valuing Żabka around PLN 32.6 billion; owners representing a majority of the shares supported the deal, and a tender was launched during August. Couche-Tard expects procurement and operational synergies from combining with one of Europe's densest convenience networks. A more efficient Żabka would not destroy Biedronka's weekly grocery proposition, but it could defend convenience spend more effectively and make neighbourhood expansion harder at the margin.

Carrefour represents the opposite trajectory: a mature international operator reassessing marginal geographies. In March 2026, Jerónimo Martins said Biedronka would be interested in many Carrefour Polish assets should Carrefour proceed with a sale. Such a deal could add locations or franchise relationships, but it would need to be judged on purchase price, overlap and competition approval. Biedronka does not need an acquisition to remain Poland's largest chain, so management should have a high hurdle for paying for assets that might otherwise lose traffic organically.

Polish regulation shapes the economics around the competitive battle. Large food retailers face a retail-specific tax regime, Sunday-trading constraints, minimum-wage regulation and active consumer-protection oversight. Poland's 2026 statutory minimum wage was set at PLN 4,806 per month and PLN 31.40 per hour, keeping labour costs on an upward nominal path even as food prices entered deflation. Jerónimo Martins faced a much more severe wage step-up in 2025; Reuters reported a roughly 9.2% Polish minimum-wage increase that year.

The retail tax matters because it is turnover-based rather than profit-based, so large chains cannot eliminate the burden merely by accepting a lower margin during a price war. I confirmed the continued existence of Poland's retail-sales-tax revenue line in government fiscal material. The current rate schedule, though, surfaced in PDF material that was not separately rendered for detailed rate verification in this research pass, so I exclude rate-level assumptions from the valuation model rather than quote them from memory.

Consumer regulation is not hypothetical here. Poland's competition and consumer regulator has scrutinised grocery-chain promotion and employment practices; in 2025 the watchdog said Biedronka's Polish unit had misled consumers in connection with some pricing/promotional practices, while separate investigations in the sector have covered alleged labour-market restrictions at large chains. None of this has threatened the group's financial survival. But a retailer whose brand promises low prices bears unusual reputational risk when promotion mechanics are judged misleading.

Energy is the other cost variable worth separating from ordinary grocery inflation. In March 2026, Pedro Soares dos Santos warned that fuel-cost uncertainty could make maintaining margins difficult. The transmission path is direct: logistics fleets, refrigerated warehouses, stores and supplier distribution consume energy; grocery chains can pass those costs to customers only if competitors do the same. In a deflationary price war, energy inflation and food-price deflation are a particularly poor combination because the cost base rises while reported basket value falls.

The current peer valuation set illustrates Jerónimo Martins' hybrid identity.

† Jerónimo Martins EV/EBITDA is my trailing calculation using the August 28 equity price and June 2026 reported net debt; the other figures are current consensus/market-data estimates and are not perfectly fiscal-period comparable.

The ranking makes economic sense. Dino commands the largest premium because its current growth comes from double-digit estate expansion in one attractive geography. Ahold Delhaize and Carrefour trade more like mature cash-flow businesses because their incremental growth is modest and they operate across less uniformly attractive assets. Tesco has strong UK scale but slower structural growth. Sainsbury's sits near Jerónimo Martins on P/E but lacks a Biedronka-style international growth engine.

Jerónimo Martins deserves some premium to Ahold and Carrefour because Biedronka still has better underlying volume growth and Ara provides a genuine second growth option. A Dino-like premium would be difficult to justify because Biedronka is already huge, group earnings are burdened by financing and investment, and the Colombian curve has not yet produced Biedronka-level returns. The present relative valuation says the market broadly recognises those differences rather than wildly mispricing them.

Unlisted European operators give useful operating comparisons. Aldi and Lidl prove that private ownership and hard-discount formats can sustain very long investment cycles. Spain's Mercadona offers another reference for dense grocery logistics, private label and high store productivity; 2025 data cited by Reuters/Kantar placed Mercadona at about 29.5% of Spanish grocery spending and showed continued sales growth. These companies matter to the study of format economics, but using them as valuation “comps” would require private-company enterprise values that are not observed in a transparent public market.

The niches are therefore clear enough. Biedronka is the national mass-market discount/proximity leader; Dino is the fastest listed domestic challenger; Lidl is the international hard-discount price rival; Żabka owns convenience; Kaufland competes more heavily in larger-basket retail. Biedronka has historically taken share from fragmented and less efficient grocery formats. Its own profit pool is most vulnerable to a sustained combination of Dino store growth and Lidl price intensity, because those competitors attack density and price perception respectively.

Current fundamentals and valuation

The latest half has enough moving pieces that the consolidated income statement is the only sensible place to start.

Source: Jerónimo Martins H1 2026 primary financial statements/presentation.

The H1 EBITDA bridge corrects an important starting-fact error: Ara contributed positively to EBITDA growth, not negatively. At constant currencies, its bridge contribution was about EUR 26 million, while the negative EUR 10 million line was Others. The operating evidence agrees: Ara's EBITDA margin rose about 70 basis points to 4.6%. The Colombian question is therefore whether the return on capital will ultimately justify heavy expansion, not whether H1 operating profitability deteriorated.

Biedronka requires a more careful decomposition. The company reports H1 LFL of +0.2%, Q1 LFL of +2.3% and Q2 LFL of -1.6%. It also shows H1 volume growth of roughly 5% and Q2 volume growth above 4%. These numbers establish a large wedge between physical activity and nominal sales, but they do not give an exact three-part breakdown into transaction count, items per transaction and price/mix. Jerónimo Martins does not disclose a clean H1 transaction-count series in the primary presentation.

If the reported roughly 5% “volume” measure were on exactly the same like-for-like perimeter as the +0.2% LFL sales measure, simple arithmetic would imply price/mix of approximately -4.6%, because 1.002 divided by 1.05 minus one is about -4.57%. The presentation does not state that the two measures have precisely identical scope, so I treat -4.6% as an illustrative sensitivity rather than a disclosed decomposition. An honest research report cannot invent the missing transaction-count-versus-units-per-basket split.

What is directly observable is enough to diagnose the cycle. Biedronka's H1 2025-to-H1 2026 sales bridge begins at EUR 12.356 billion, adds only EUR 29 million from like-for-like performance, adds approximately EUR 211 million from new/refurbished stores and then loses about EUR 31 million to foreign-exchange translation, ending at EUR 12.563 billion. Growth is presently coming mainly from physical expansion and volume, not pricing.

The national Polish food-price series helps separate company execution from macro. Three months of observations show the inflection.

Food series is the Statistics Poland-derived public series reported by Trading Economics; headline figures and the July food monthly move are from Statistics Poland releases.

The distinction that matters is magnitude. National food CPI only slipped mildly below zero, while Biedronka describes mounting basket deflation and reported a sales/volume gap much larger than -0.4%. That suggests company assortment and promotional effects are materially amplifying national food deflation. It also explains how Biedronka can show a better EBITDA margin while barely growing LFL: lower procurement costs and mix can support gross margin even while promotional pricing suppresses nominal sales.

The next four-quarter trend is therefore mixed rather than simply deteriorating. Biedronka LFL moved from +3.6% in Q3 2025 to +2.4% in Q4, +2.3% in Q1 2026 and -1.6% in Q2. Volume remained positive. Group Q4 2025 sales grew strongly enough that full-year 2025 ended at EUR 35.991 billion of sales and EUR 2.480 billion of EBITDA; H1 2026 then maintained EBITDA growth despite the Polish LFL deceleration.

A robust public historical consensus series was not available in the sources used here, so I do not label individual quarters “beat” or “miss” based on reconstructed estimates. Capital-market reactions give a cleaner reading of what mattered: the stock's 2024 collapse followed unexpectedly weak Biedronka sales and margins; the March 2026 post-results decline came despite higher Q4 profit because investors focused on the forward margin risks from Polish deflation and energy. That reveals a market focused more on forward Biedronka economics than on one-quarter consolidated EPS.

H1 cash flow requires the same forward-looking treatment.

Source: company H1 2026 cash-flow bridge.

A EUR 332 million cash outflow is meaningful. Working capital accounts for more than the entire negative result after investment, and management connects the working-capital movement to the deflationary environment. Falling purchase prices can reduce nominal payables; opening stores and distribution capacity can also require inventory before sales mature. So the half-year should not be annualised mechanically. The test is whether the structurally negative working-capital model reasserts itself by year-end.

The funding position remains better than a headline EUR 4.430 billion net-debt figure suggests. At June 2026, cash was EUR 1.587 billion, borrowings EUR 1.412 billion, financial leases EUR 156 million and capitalised operating leases EUR 4.441 billion. Excluding IFRS-16 operating leases, Jerónimo Martins reported EUR 11 million of net cash. Those four components leave about EUR 8 million unreconciled against the reported net-debt and net-cash figures, so one debt-like item sits outside the list; the reported EUR 4.430 billion and EUR 11 million are mutually consistent and are the figures used throughout. The financial risk comes less from refinancing a conventional leveraged balance sheet than from the economic obligation to keep paying billions of euros of store leases while also funding new capital expenditure.

Net financial cost still deserves attention, because it has become a material earnings drag. The H1 EUR 193 million run rate annualises to roughly EUR 386 million, versus FY2025's EUR 322 million. Only EUR 46 million of H1 net financial cost remained on the company's ex-IFRS-16 basis, meaning most of the accounting line is connected to leases. Higher underlying rates and greater borrowing matter too, but investors should resist describing all EUR 193 million as interest on conventional bank debt.

Ara is the clearest acceleration business. Sales rose 21.1% in local currency, LFL was +6.8%, the estate reached approximately 1,708 locations including Bodegas del Canasto, and EBITDA margin rose to 4.6%. Opening a Medellín distribution centre adds near-term fixed cost but should improve long-run density economics if store growth fills the network. The bull case requires Ara eventually to earn far higher returns than its current low-single-digit ex-IFRS-16 EBITDA margin.

Pingo Doce gives the opposite kind of evidence: mature, slower structural growth with respectable current LFL and a stable margin. Recheio remains a smaller cash contributor, and Hebe's rapid IFRS-16 margin improvement is less striking on an ex-lease basis. Those businesses matter, but none can offset a large sustained deterioration in Biedronka, because the Polish banner's earnings contribution is simply too dominant.

The market appears to be trading three linked expectations. First, food deflation will eventually normalise without Biedronka losing material physical market share. Second, the current margin improvement is durable enough that higher nominal sales eventually create operating leverage. Third, Ara and continued store expansion will justify the capital consumed before they mature. These are substantive assumptions, but the current valuation does not require explosive earnings growth.

The immediate bull case rests on volume. A retailer moving approximately +5% more physical volume during deflation is showing demand resilience. Gross margin and EBITDA margin also rose, which argues that price investment has not yet broken economics. If Polish food CPI returns to +1–2% while unit volume remains above 3%, Biedronka can turn essentially the same physical activity into much better nominal LFL without needing a heroic increase in market share.

The immediate bear case is the cost wedge. Polish customers remain highly value-conscious, Dino is adding stores, Lidl can match promotions, wages still rise in nominal terms and energy could turn upward. If the basket stays deflationary, Biedronka has to fund cost increases from productivity or gross margin. There is no automatic right to pass them through.

Valuation begins with cash-flow passthrough rather than P/E. FY2025's raw post-tax operating cash flow was EUR 2.425 billion against EUR 646 million of attributable net income, but that ratio is inflated by EUR 550 million of creditor cash generation and by lease payments recorded below operating cash flow. Deducting EUR 1.057 billion of cash capex, EUR 279 million of lease interest and EUR 409 million of lease principal gives the approximately EUR 680 million conservative FCF proxy discussed above. That is close enough to reported net income that there is no greater-than-30% structural gap forcing a wholesale rejection of P/E, provided lease costs and maintenance capex remain explicit.

The company does not publish maintenance capex separately. For owner-earnings purposes I use an analytical range in which roughly EUR 0.5–0.7 billion of a normal EUR 1.1–1.2 billion annual investment programme is recurring maintenance, refurbishment and logistics upkeep, with the balance attributable to growth and productivity expansion. The evidence for the range is the mixed H1 programme of 115 remodels, 124 store openings and new distribution centres. This is deliberately less precise than pretending management has provided a number it has not.

Trailing attributable net income through H1 2026 is approximately EUR 637 million: FY2025 EUR 646 million, less H1 2025 EUR 269 million, plus H1 2026 EUR 260 million. At EUR 17.97 and 629.293 million issued shares, that produces a trailing reported P/E of about 17.8 times. Repeating the calculation with ex-IFRS-16 net income, about EUR 701 million on a trailing basis, produces approximately 16.1 times.

Market consensus carried by the current market-data source is around EUR 1.077 of 2026 EPS, which corresponds to about 16.7 times forward earnings at the August 28 close. A separate historical-multiples source places the recent three-year P/E average near 19.4 times. These are secondary-source indicators rather than company disclosures, but taken together they imply that the stock is below its recent valuation centre without being at a distressed multiple.

Current valuation looks fair on base assumptions and unprotected on a conservative case. A mature grocer at 16–18 times earnings would look expensive beside Carrefour or Ahold; a high-return Polish growth retailer at that multiple could be attractive. Jerónimo Martins sits between those descriptions. That is why an owner-earnings scenario framework is more useful here than picking the cheapest peer multiple.

The valuation below is deliberately based on sustainable cash earning power rather than the most favourable reported cash-flow year.

The owner-earnings amounts, multiples and return ranges are my assumptions based on the primary financial record; they are not management guidance. This is valuation-scenario analysis within a research framework, not investment advice. Primary financial inputs come from FY2025 and H1 2026 disclosure.

The conservative case values Jerónimo Martins at about EUR 16.75 per share, below the current EUR 17.97. It assumes that physical volume remains positive but deflation/competition keep nominal growth subdued, that the ex-IFRS-16 EBITDA margin slips toward the mid-4% range, and that investors only pay about 15.5 times owner earnings. The downside is relatively modest in the valuation itself because this is a conservative operating case rather than a disaster case.

The base case assumes low positive Polish food inflation eventually returns, Biedronka keeps enough volume momentum to grow nominal comparable sales, Ara continues its margin climb and owner earnings normalise toward EUR 750 million. At 17.2 times, that produces roughly EUR 20.50 per share. The multiple is lower than the recent three-year P/E centre and substantially below Dino's growth multiple, while remaining above mature European grocers.

The optimistic case requires more than inflation. It assumes Biedronka preserves a roughly 5% ex-IFRS-16 group margin environment, store growth continues to earn attractive returns and Ara develops a meaningful profit contribution rather than simply a large sales base. EUR 840 million of owner earnings at 19.5 times gives approximately EUR 26.03 per share. That is close to JMT's 2023 share-price high, making the scenario economically comprehensible rather than a blue-sky number.

The expectation gap is most likely to emerge in three places. First, Biedronka LFL could recover much faster than expected if food CPI returns from -0.4% toward modest positive inflation while volumes remain strong. Second, margin could disappoint if management must reinvest procurement benefits into promotions. Third, year-end working capital could either reverse the H1 cash drain or confirm that expansion and deflation have changed the historical supplier-funded model more than bulls assume.

The next scheduled hard checkpoint is the 9M 2026 results, expected on October 28, 2026 after market close. The market is likely to care more about Biedronka's Q3 LFL, volume and margin than consolidated euro sales. Ara's local-currency margin and year-to-date cash conversion are the next two variables.

The margin-of-safety test is harsher than the fair-value test. Current EUR 17.97 is about 7% above my EUR 16.75 conservative intrinsic estimate, so there is no discount to the conservative case. By the framework's own rule, a price above conservative value has zero conservative margin of safety.

The most fragile base assumption is sustainable Biedronka earnings power, specifically the combination of mild nominal sales growth and a stable ex-IFRS-16 margin. If the incremental earnings uplift assumed above the conservative EUR 680 million level is realised at only 70%, normalised owner earnings would be roughly EUR 729 million rather than EUR 750 million. At the same 17.2 times multiple, intrinsic value falls to approximately EUR 19.9 per share. That is still above EUR 17.97, but the cushion is not large enough to make valuation the centre of the bull case.

With earnings flat for three years and an unchanged valuation multiple, shareholder return would come mainly from the approximately 3.6% current dividend yield. I did not obtain a same-day primary quote for Portugal's ten-year sovereign yield in the source set used here, so I do not manufacture the bond comparison required to claim a precise equity-risk premium. The economically important point is that a flat-earnings JMT purchased at EUR 17.97 offers only a mid-single-digit cash return before any multiple change.

Margin-of-safety verdict: none. This is not the same as saying the shares are grossly overvalued. It means the current price does not satisfy a conservative value-investing requirement that the stock be bought below an already cautious estimate of intrinsic value.

Risks, catalysts and cross-synthesis

The largest permanent-loss risk is a Polish competitive/deflation spiral. I assess its probability as medium and its impact as high. The observable combination would be Biedronka LFL below zero for two or more quarters, volume growth falling below roughly 2%, and EBITDA margin declining despite lower purchase costs. The transmission path is straightforward: Lidl and Dino keep price intensity high, Biedronka responds, nominal sales density remains weak, fixed labour and occupancy costs rise per euro of sales, earnings estimates fall and the equity multiple moves from a growth-retailer level toward a conventional grocer level. The 16.6% one-day 2024 share fall shows that the market can compress both earnings expectations and multiple rapidly when this narrative takes hold.

A wage-and-energy mismatch is the second material risk. Probability is medium; impact is medium to high. Poland's 2026 minimum wage is PLN 4,806 per month after a much larger increase in 2025, and management has explicitly warned about energy and fuel uncertainty. If grocery prices remain flat or negative, these costs cannot be recovered mechanically through price. Watch personnel expense, logistics cost and Biedronka EBITDA margin rather than headline Polish CPI alone.

Capital intensity is the third. Probability is medium and impact can be high if it persists for several years. The group plans around EUR 1.2 billion of 2026 investment and already carries EUR 4.441 billion of capitalised operating lease liabilities. H1 cash flow was negative EUR 332 million after a EUR 504 million working-capital outflow. If full-year free cash flow after leases remains below about EUR 400 million for two successive years while new-store returns weaken, the market would be justified in valuing store growth as capital consumption rather than compounding.

Colombia creates a fourth, subtler risk. Probability that Ara experiences at least one difficult operating or currency year is medium; the impact on current group earnings is medium because Ara remains much smaller than Biedronka, but the capital-allocation impact can become high. H1 performance was genuinely good, with 21.1% local-currency sales growth and a 4.6% EBITDA margin, but reported euro growth of 30.2% shows how strongly translation can move reported numbers. A long period of peso weakness, slower LFL growth or poor store-level returns could make years of growth investment worth less than accounting sales growth suggests.

Regulatory and reputation risk is medium probability and medium impact. A large discount retailer makes many thousands of price and promotional claims, operates in a heavily regulated labour market and is exposed to Sunday-trading and consumer-protection rules. A single administrative fine is unlikely to threaten Jerónimo Martins; repeated findings that undermine Biedronka's low-price credibility would be more serious because trust in promotion is part of the economic franchise.

Valuation itself is a sixth risk. Around 17 times earnings does not look excessive against Jerónimo Martins' own recent history, but it is still a material premium to Carrefour and Ahold. If investors decide Biedronka's mature Polish estate deserves a 12–14 times supermarket multiple, the stock can fall materially even without a collapse in absolute earnings. Jerónimo Martins' 2024 experience provides a real precedent for that reclassification risk.

Positive catalysts begin with an unexciting macro event: Polish food inflation returning to low positive territory. A move from current mild deflation toward 1–2% food inflation, with Biedronka volume still around 3–5%, would improve nominal LFL and sales density without the cost shock that comes with high inflation. What makes it matter is the interaction with current procurement and margin, not the inflation itself.

A second positive catalyst would be proof that the H1 margin is durable. Biedronka at an 8.0% IFRS-16 EBITDA margin and approximately 6.1% ex-IFRS-16 despite negligible LFL is operating well. Repeating those economics while nominal LFL turns positive would remove much of the current bull/bear disagreement.

Ara could become the third catalyst. If local-currency sales remain above 15%, LFL stays above 5% and EBITDA margin progresses toward 5% or more, investors can begin valuing Colombia as an emerging profit engine instead of a claim on future scale. The H1 2026 numbers moved in that direction.

Interest and financing costs are another lever. H1 net financial expense rose 22.7%. A plateau or decline in underlying financing rates would let EBITDA growth reach net income more efficiently, particularly if conventional borrowings stop rising, and it would show up quickly in the reported EBITDA-to-net-profit bridge.

A Carrefour Poland transaction could be positive only at a disciplined price. Biedronka has publicly expressed interest in assets. The catalyst is therefore not “M&A happens”; it is that management gains strategically valuable locations at a return above its ordinary greenfield expansion economics without provoking excessive antitrust remedies.

Negative catalysts are the mirror image but have more near-term power: another negative Biedronka LFL quarter, Q3 volume slipping below about 2%, a reversal of the gross-margin improvement, H1 working-capital use failing to unwind, full-year investment moving materially above the approximately EUR 1.2 billion plan, or a new Polish price campaign from Lidl/Dino that forces Biedronka to increase promotions.

The tracking dashboard I would use is intentionally small enough to update each quarter.

Sources: company H1 results/outlook, Statistics Poland-derived food CPI series and Jerónimo Martins financial calendar.

The dashboard should be read jointly. For example, a -1% Biedronka LFL is much less alarming with +5% physical volume and an 8% margin than with +1% volume and a 7% margin. Likewise, Ara's 20% sales growth is much less valuable if EBITDA margin retreats. The purpose is to distinguish deflationary accounting optics from actual loss of customer demand or operating productivity.

Across more than two centuries of corporate history and more than three decades as a listed company, the capability Jerónimo Martins has genuinely proven is retail replication: it can take a relatively simple grocery proposition, build procurement and logistics around it, densify a store estate and keep reinvesting for years. Biedronka is the proof. The company acquired the chain in 1997, and by 2025 the banner alone generated roughly PLN 108 billion in sales and dominated group earnings. That outcome is too large and too durable to explain as a favourable macro cycle.

The success was nevertheless helped by an era. Poland's development, rising household incomes, modern retail penetration and the transfer of share from fragmented traditional retail gave a competent discount operator a long runway. Management execution converted those tailwinds into economics; the tailwinds did not create Biedronka by themselves. That distinction matters now, because the future Polish opportunity is more about defending and incrementally densifying a very large position than about recreating the same penetration curve from scratch.

The most durable success factor is scale. Biedronka can buy, distribute and advertise across nearly four thousand Polish stores, allowing a procurement advantage that is difficult for a small entrant to match. The second is density. Distribution centres and regional stores form a network whose economics improve as routes and fixed logistics costs are used more intensively. The third is price credibility. H1 2026 volumes show that shoppers are still using the chain heavily even when aggressive pricing shrinks basket value.

The least durable historical advantage is scarcity. Years ago, investors seeking listed exposure to a fast-modernising Polish grocery sector had fewer obvious choices. Dino is now a large public company with faster unit growth; Żabka became a listed capital-markets reference before Couche-Tard's bid; global investors can also pick among several European grocers. Jerónimo Martins now has to earn its valuation through cash returns rather than simply by being the most obvious listed Polish grocery proxy.

Horizontally, Biedronka remains stronger than Dino in sheer scale and nationwide purchasing power, while Dino has a more obvious store-growth runway. Biedronka has more direct brand and price overlap with Lidl, but Lidl benefits from Schwarz's international resources. Biedronka beats Żabka for weekly basket economics; Żabka beats Biedronka for immediate convenience. Those are durable niche differences, which is why the most plausible competitive outcome is continued coexistence with constant pressure on price rather than a winner eliminating the others.

The current weakness looks more cyclical than structural so far. A structurally weakening retailer would normally show sustained traffic or volume loss, deteriorating margins and a failing balance sheet. Jerónimo Martins presently shows the opposite on two of those three measures: Biedronka volume is strongly positive and margin improved; the ex-IFRS-16 balance sheet is near net cash. The structural question would return if volume falls once competitors have fully cycled their new-store additions, or if margin can be defended only by persistent underinvestment in price.

The capital market may currently be underestimating how rapidly nominal sales could recover from even a small food-price normalisation. The H1 comparison puts this clearly: roughly 5% physical volume against only 0.2% Biedronka LFL leaves a large amount of “hidden” activity behind the nominal figure. Low positive price/mix would turn some of that activity directly into sales density.

It may at the same time be underestimating how hard margin is to preserve through that normalisation. A grocer does not receive inflation in isolation: wages, electricity, fuel, supplier prices and competitors' promotions move too. Investors who simply take +5% volume and add +2% food inflation to construct future LFL risk assuming away the competitive mechanism that created the deflationary basket in the first place.

For the next 12 months, three variables dominate: Polish food CPI and Biedronka basket pricing; Biedronka volume/margin; and cash conversion. The October 28 9M report should show whether Q2's -1.6% LFL was the trough or the beginning of a more persistent nominal contraction. A working-capital recovery would also reduce the credibility of the “cash strain” bear case.

Over three years, the question changes from deflation to capital productivity. Biedronka must keep mature-market returns high while extending into Slovakia, and Ara must begin producing enough EBITDA and cash flow to justify the Colombian distribution and store network. A group growing sales through permanently higher capex but not owner earnings would deserve a lower multiple even if the top line looks healthy.

Over five years, the fate question is whether Jerónimo Martins can recreate part of the Biedronka scaling system outside Poland. Ara is already large enough at almost EUR 2 billion of H1 sales to matter, but its margin remains far below Biedronka. If Colombia develops toward Biedronka-like density economics, Jerónimo Martins gains a second compounding engine. If it settles as a low-margin capital consumer, Poland remains overwhelmingly dominant and the group gradually deserves a more mature-grocer valuation.

Bull reasons

• Biedronka's roughly 5% H1 volume growth while LFL was only +0.2% shows real customer demand beneath deflationary nominal sales.
• Biedronka's EBITDA margin rose to 8.0% despite basket deflation, evidence that lower input costs and operating execution have so far offset weak sales density.
• Ara grew 21.1% in local currency, delivered +6.8% LFL and increased its EBITDA margin from 3.9% to 4.6%, indicating better scale economics rather than deterioration.
• Excluding IFRS-16 operating leases, Jerónimo Martins ended H1 near net cash, giving the group capacity to fund expansion through the current cycle.
• The current approximately 16.7 times 2026 consensus P/E is below Jerónimo Martins' recent valuation centre and far below Dino's growth multiple.

Bear reasons

• Biedronka's Q2 LFL fell 1.6% while Dino continues rapid store expansion and Lidl competes aggressively on price, leaving little room for complacency about market share or sales density.
• H1 cash flow was negative EUR 332 million after EUR 504 million of working-capital absorption and EUR 591 million of investment payments, so accounting EBITDA growth did not translate into current-period cash.
• Net financial cost rose 22.7% to EUR 193 million, causing attributable net profit to fall 3.5% despite 7.6% EBITDA growth.
• The group plans roughly EUR 1.2 billion of 2026 investment while carrying EUR 4.441 billion of operating lease liabilities, making incremental returns on new stores increasingly important.
• At EUR 17.97 the shares are above my EUR 16.75 conservative intrinsic value and still trade at a premium to slower-growth mature European grocers, so the current price offers no conservative valuation cushion.

Pre-mortem

A plausible three-year loss script begins in 2027 with Polish food inflation remaining around zero or mildly negative while Dino continues double-digit estate growth and Lidl runs another national price campaign. Biedronka responds to protect traffic, but volume growth slows from about 5% to 1–2% as competitors add capacity. LFL stays around -2%, the IFRS-16 EBITDA margin falls from 8.0% toward 6.5%, and owner earnings fall from roughly EUR 700 million toward EUR 450–500 million. Investors stop valuing JMT as a Polish structural grower and apply 12–13 times earnings. An equity value around EUR 8.5–10 per share becomes plausible, roughly 44–53% below the August 2026 price. This is a stress test, not a forecast. The competitive and margin starting points are observable today.

A second script combines capital intensity with disappointing Colombia returns. Jerónimo Martins continues annual investment around EUR 1.2–1.4 billion through 2027–2028, Ara sales keep growing but margin stalls below 4%, Polish finance and lease costs remain high, and annual free cash flow after leases drops below EUR 300–400 million. The market then assigns a 14 times multiple to approximately EUR 0.80–0.85 of sustainable owner earnings per share, implying roughly EUR 11–12. The loss would come from years of capital earning too little, rather than from a liquidity crisis.

My central synthesis is that Jerónimo Martins has a better business than its current Polish sales growth suggests and a less effortless financial model than its headline EBITDA suggests. Biedronka's volumes, scale, margin and ex-lease balance sheet are evidence of genuine operating quality. Food deflation has hidden that quality in nominal LFL. Yet IFRS 16, rising finance costs, EUR 1.2 billion of investment and the H1 working-capital outflow show that translating retail growth into shareholder cash is becoming more capital-intensive.

At EUR 17.97, the market has already removed much of the old growth premium: the shares are roughly one-third below their 2023 high and trade around 16–18 times current earnings rather than at Dino's above-20-times forward multiple. My base value around EUR 20.50 leaves moderate upside, but the conservative value of approximately EUR 16.75 is below the share price. That combination makes the shares reasonable for an existing long-term holder who believes Biedronka's volume strength survives the cycle, but insufficiently discounted for a new investor demanding a genuine margin of safety.

A materially better entry would require price rather than simply a better narrative. At EUR 12.5–13.5, provided Biedronka is still growing physical volume above about 3%, ex-IFRS-16 group EBITDA margin remains above roughly 4.5–5.0%, and free cash flow has not structurally broken, an investor would receive a 19–25% discount to my conservative estimate. Conversely, I would overturn the positive long-term quality judgment if Biedronka volume fell below 2% for multiple quarters while margin simultaneously slipped below the reassessment thresholds set out in the rating block, because that would signal a competitive rather than purely deflationary problem.

【Company-profile scores】

• Fundamental quality: high
• Growth: medium
• Moat: medium
• Financial soundness: strong
• Management credibility: high
• Valuation attractiveness: medium
• Risk level: medium
• Suitable investor type: long-term growth

The “medium” moat score is deliberate. Biedronka has powerful scale and density advantages, but grocery customers have virtually no switching costs and competitors can force price savings through to shoppers. Financial soundness scores strong because conventional leverage is modest and the company is near net cash ex-IFRS-16; that does not make the EUR 4.4 billion lease obligation economically irrelevant.

【Investment rating】

• Rating: Hold
• One-line thesis: Biedronka's volume-led margin resilience is real, but EUR 17.97 offers no discount to the conservative owner-earnings case while financing costs remain elevated.
• Current-price classification: acceptable hold
• Whether to wait for a better price: yes
• Target holding horizon: 3–5 years
• Expected annualized return: conservative 2–4%; base 9–12%; optimistic 15–18%
• Max-loss risk: roughly 44–53% in the competitive-deflation pre-mortem if Biedronka margin falls toward 6.5% and the multiple compresses to 12–13 times.
• Reassessment-trigger signals: Biedronka LFL below 0% for two consecutive quarters together with volume below 2%; Biedronka IFRS-16 EBITDA margin below 7.2% for two reporting periods; group ex-IFRS-16 EBITDA margin below 4.5%; trailing net financial expense above EUR 400 million; or annual free cash flow after leases and capex below EUR 400 million for two consecutive years. Current price source: company investor page, August 28, 2026 close.

【Ideal Buy Price】12.5–13.5 EUR

Basis: this range sits 19–25% below the approximately EUR 16.75 value implied by the conservative owner-earnings scenario. The operational conditions are equally important: Biedronka volume should remain above roughly 3%, ex-IFRS-16 group EBITDA margin should remain around or above 4.5%, and there should be no evidence that free cash flow has structurally deteriorated. The opportunity cost of waiting is approximately the 3.6% dividend yield plus any earnings growth and re-rating that occurs before the share price enters the range.

The acceptable-hold band is EUR 17.5–23.5, centred broadly around the EUR 20.50 base valuation and within the framework's approximately ±15% tolerance. The current EUR 17.97 is just inside the lower end, which is consistent with Hold rather than Buy. A price above EUR 28.7 would exceed the approximately EUR 26.03 optimistic intrinsic value by more than 10%; at that point the market would be pre-spending a more successful Ara and a much easier Polish pricing environment than current evidence supports.

【Valuation Range】

• current: 17.97 EUR (close as of 2026-08-28)
• bear (conservative · ideal buy zone): [12.5, 13.5]
• base (fair · acceptable hold zone): [17.5, 23.5]
• bull (optimistic · above the clearly-overvalued line): [28.7, 31.0]

Sources and research uncertainties

The primary source stack is Jerónimo Martins' H1 2026 results and presentation, including the income statement, cash bridge, Biedronka volume/deflation slides, banner EBITDA bridge and investment programme; the FY2025 annual report and five-year summary; ownership, governance, share and dividend disclosures; the company's historical pages; and its financial calendar. These are the controlling sources when secondary articles conflict.

Polish macro and regulatory work uses Statistics Poland inflation releases, Polish government material on Sunday trading, and current statutory-wage information. Competitive research uses public company disclosure plus Reuters and European Supermarket Magazine for developments not disclosed by Jerónimo Martins, including the Carrefour Poland situation, Żabka/Couche-Tard transaction and Dino's estate growth.

Peer-multiple work uses current market-data/consensus sources, since peers do not disclose their own market multiples in financial statements. Those estimates use differing fiscal years and lease/capital definitions, so they are used to place Jerónimo Martins within the sector, not as a mechanical fair-value formula.

Five research blind spots should remain visible.

• The accessible primary historical archive confirmed the November 1989 Lisbon listing but did not provide a reliable total IPO-proceeds figure. A Portuguese issuer-history source reports that approximately 15% of capital was offered at a retrospectively expressed EUR 16.5 per share; I do not infer proceeds without the contemporaneous share count and currency treatment.
• Jerónimo Martins does not disclose enough H1 data to split Biedronka's +0.2% LFL exactly into transaction count, units per transaction and price/mix. The approximately -4.6% price/mix figure shown earlier is only a sensitivity assuming the roughly +5% volume statistic uses the identical perimeter.
• Maintenance versus growth capex is not separately reported. The EUR 0.5–0.7 billion recurring-capex range in the owner-earnings analysis is an analyst assumption grounded in store remodels, new openings and logistics investment.
• A fully comparable 2021 operating-cash-flow figure was not recovered in the primary set used for the cash-conversion calculation, so the reported OCF/net-income ratio is explicitly 2022–2025 rather than a fabricated five-year statistic.
• Public Polish grocery “market-share” figures use inconsistent denominators. This report therefore relies more heavily on disclosed turnover, store density, LFL growth and estate expansion than on false-precision share percentages.

Other tickers mentioned

• DNP.WAR: Dino Polska is the closest listed Polish grocery-growth comparator and the most important domestic store-expansion challenger to Biedronka.
• AD.AS: Ahold Delhaize provides a mature, cash-generative European food-retail valuation reference.
• CA.PA: Carrefour is a lower-valued mature European grocer and a potential seller of Polish assets in which Biedronka has expressed interest.
• TSCO.LSE: Tesco is a UK market-leader benchmark for mature grocery margins, leverage and shareholder returns.
• SBRY.LSE: Sainsbury's provides another listed UK supermarket valuation benchmark near JMT's current P/E range.
• ZAB.WAR: Żabka is Poland's dense convenience competitor and is currently subject to the Couche-Tard acquisition process.
• ATD.TO: Alimentation Couche-Tard is the proposed buyer of Żabka and could bring additional procurement and convenience-retail capabilities to the Polish competitor.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.