Jeronimo Martins investment in price at Biedronka could hit margins, Kepler Cheuvreux says

Jeronimo Martins' investment in price at Biedronka could hit margins, Kepler Cheuvreux says

Portugal-based retailer Jeronimo Martins has reported an 11% increase in sales for 2013 - but slowing growth in Poland, its largest market, hit its shares.

Jeronimo Martins booked sales of EUR11.83bn (US$16.18bn), compared to EUR10.68bn in 2012. Like-for-like sales were up 3.5%. The retailer said an increase in sales volumes boosted the result with inflation falling year-on-year.

The retailer said 2013 had been "a challenging year" in Portugal and Poland, its two largest markets.

In Poland, which accounts for 65% of Jeronimo Martins' revenue, the retailer saw like-for-like sales increase 2.5% in the fourth quarter.

Annual like-for-like sales in Poland were up 4.2%. Kepler Cheuvreux analyst Inigo Egusquiza said the rate of growth was the slowest Jeronimo Martins has acheived in Poland since it entered the market in 1995.

In Portugal, like-for-like sales at the retailer's Pingo Doce chain were up 2.8%, excluding fuel. At its Recheio warehouse business, like-for-like sales inched up 0.8%.

Egusquiza said the results in Portugal were "a positive surprise", while the retailer's performance in Poland were "a negative surprise again".

"Biedronka's price investment policy to defend its price leadership position continues, which will have a significant impact on margins in our view," Egusquiza said.

Shares in Jeronimo Martins, which reports its full annual results next month, were down 2.93% at EUR13.61.