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Margin gains offset seasonal sales slowdown; PT up, BUY.
Post-Christmas lull, like-for-like still up. Ceconomy reported a resilient Q2 FY24/25. Sales were down by 1.6% yoy to EUR 5.25bn (+1.3% yoy on a currency and portfolio-adjusted basis), meeting consensus expectations. Like-for-like sales were up 0.8%. While the brick-and-mortar (B&M) business was flat, online sales grew strongly by 7.4% yoy, lifting the online share (including Marketplace) to 24.9% (+200bp YoY). Growth businesses remained a key profit driver: Marketplace GMV surged ~90% yoy, Services & Solutions sales rose 7%, and Retail Media delivered strong income growth.
Regional divergence. Western/Southern Europe was the standout performer, with flat sales and a EUR 10m uplift in adjusted EBIT, supported by improvements in Italy, Spain, and the Netherlands. DACH remained under pressure, posting a 3.4% sales decline, though gross margin gains helped lift EBIT modestly. Eastern Europe delivered +23.6% yoy growth, driven by Türkiye, while Poland continued to face a challenging environment. Restructuring efforts in Poland are ongoing.
Improved profitability. The group’s adjusted gross margin rose 50bp yoy to 18.4%, supported by the expanding share of growth businesses. OPEX remained stable as a percentage of sales, reflecting tight cost control. Adjusted EBIT rose EUR 4m yoy to EUR 10m, above expectations (EUR 6m), with the margin improving by 10bp to 0.2%. However, reported EBIT declined to EUR 14m, impacted by non-recurring items such as fire damage in the Netherlands and impairments in Poland.
Outlook confirmed: Management reaffirmed FY24/25 guidance of moderate sales growth and a clear EBIT increase, driven by DACH and Western/Southern Europe.
Conclusion: A relatively muted Q2 is normal for Ceconomy. More importantly, it showed margin improvements as it controls costs, and scales growth businesses during this seasonal lull. As we pointed out in a previous note, we see no disruption to the company’s transformation process. On minor adjustments, we raise our PT to EUR 3.90 (old. EUR 3.75), maintaining our BUY rating.
Previous Updates
Key Figures
| Key P&L Data (EURm) | 2022 | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|---|
| Sales | 21,768.0 | 22,242.0 | 22,442.0 | 23,171.4 | 23,634.8 | 23,989.3 |
| Sales growth | 1.9% | 2.2% | 0.9% | 3.3% | 2.0% | 1.5% |
| EBITDA | 866.0 | 814.0 | 916.4 | 1,029.5 | 1,103.0 | 1,122.8 |
| EBITDA margin | 4.0% | 3.7% | 4.1% | 4.4% | 4.7% | 4.7% |
| EBIT | 105.0 | -21.0 | 254.0 | 359.2 | 439.6 | 460.6 |
| EBIT margin | 0.5% | -0.1% | 1.1% | 1.6% | 1.9% | 1.9% |
| Key B/S Data (EURm) | 2022 | 2023 | 2024 | 2025E | 2026E | 2027E |
| ROCE | 2.7% | -0.6% | 7.1% | 9.4% | 10.9% | 10.8% |
| Net financial debt | 1,860.0 | 1,564.0 | 1,620.0 | 1,516.9 | 1,443.6 | 1,346.0 |
| Net debt/EBITDA | 2.1x | 1.9x | 1.8x | 1.5x | 1.3x | 1.2x |
| EPS reported | 0.31 | -0.08 | 0.16 | 0.40 | 0.52 | 0.54 |
| DPS | 0.00 | 0.00 | 0.00 | 0.08 | 0.10 | 0.11 |
| 2022 | 2023 | 2024 | 2025E | 2026E | 2027E | |
| EV/Sales | 0.2x | 0.2x | 0.2x | 0.1x | 0.1x | 0.1x |
| EV/EBITDA | 4.3x | 4.2x | 3.8x | 3.3x | 3.0x | 2.9x |
| EV/EBIT | 35.3x | -161.5x | 13.6x | 9.4x | 7.5x | 7.0x |
| P/E | 9.9x | -38.8x | 19.9x | 7.8x | 6.0x | 5.8x |
| P/B | 2.1x | 3.3x | 2.9x | 2.1x | 1.6x | 1.3x |
| FCF yield | -41.6% | 25.3% | 13.4% | 8.2% | 10.3% | 13.7% |
| Dividend yield | 0.0% | 0.0% | 0.0% | 2.6% | 3.3% | 3.5% |
Source: Company data; mwb research
Key Figures 2025E
Sales in EURm
Investment Case
Investment Case
Before the pandemic, leading consumer electronics retailer in Europe Ceconomy (brands: MediaMarkt, Saturn) is targeting to manage the secular shift towards online shopping, which negatively affected sales in the traditional bricks-and-mortar business. Following long-term issues with the MediaMarkt founder family, the lack of continuity on a management level, as well as several shocks, such as the Covid-19 pandemic, supply chain issues, the war in Ukraine, and inflation, Ceconomy aims to transform to a customer-focused service platform, which should ultimately lead to improved profitability and cash inflows. The main pillars of Ceconomy’s transformation strategy are:
- A holistic realignment of the retail business (stores, assortment, digital offering),
- Growth and enhancement of the Services & Solutions business (e.g. subscription services),
- A further roll-out and expansion of the marketplace,
- Increasing the share of private label assortment,
- Expansion of AdTech business (Retail Media).
Resting on the strategic approach, the company presented medium-term financial targets. By FY2025/26, the company expects to grow net sales in the low single-digits (“slightly above market growth”). Regarding profitability, the above-mentioned priorities, in particular the expansion of the higher-margin Services & Solutions business, are expected to allow EBIT to more than double to EUR 500m (base FY21/22 adj. EBIT: EUR 208m).
Ceconomy’s planned initiatives confirm our previous assessment that there is limited margin potential via the retail core business itself. Based on a streamlining of the core business, Ceconomy is trying to improve earnings quality with high-margin additional services, which has already proven successful with other retailers. If the company delivers and approaches the numerous, albeit very ambitious targets, this should provide leeway for further forecast increases and a re-rating.
Investment case in Charts
Major Shareholders
Sales and earnings momentum
SWOT-Analysis
ROCE
- Leading consumer electronics retailer in Europe
- Exit from difficult markets – shareholdings in market leaders
- Settled issues with shareholders
Valuation
At mwb research, we apply different valuation techniques. The DCF model results in a fair value of EUR 3.90 per CECONOMY AG share. This is based on the following assumptions: for the top line, we expect a CAGR 2025E-2032E in the range of 1.6% p.a. The long-term growth rate is set at 1.5%. Cost of equity is calculated as 21.7%. This results in a long-term WACC of 10.2%. For further detail and a sensitivity analysis, see the DCF model below. We also perform a free cash flow analysis. The adjusted Free Cash Flow Yield results in a fair value between EUR per share based on 2025E and 11.87 EUR per share on 2029E estimates. Again, more details can be found below.
| 2022 | 2023 | 2024 | 2025E | 2026E | 2027E | |
| EV/Sales | 0.2x | 0.2x | 0.2x | 0.1x | 0.1x | 0.1x |
| EV/EBITDA | 4.3x | 4.2x | 3.8x | 3.3x | 3.0x | 2.9x |
| EV/EBIT | 35.3x | -161.5x | 13.6x | 9.4x | 7.5x | 7.0x |
| P/E | 9.9x | -38.8x | 19.9x | 7.8x | 6.0x | 5.8x |
| P/B | 2.1x | 3.3x | 2.9x | 2.1x | 1.6x | 1.3x |
| FCF yield | -41.6% | 25.3% | 13.4% | 8.2% | 10.3% | 13.7% |
| Dividend yield | 0.0% | 0.0% | 0.0% | 2.6% | 3.3% | 3.5% |
Source: Company data; mwb research
DCF 2025E
Multiples 2025E
Financials
| Profit and loss (EUR m) | 2022 | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|---|
| Sales | 21,768.0 | 22,242.0 | 22,442.0 | 23,171.4 | 23,634.8 | 23,989.3 |
| Cost of sales | 17,961.0 | 18,303.0 | 18,481.0 | 19,109.4 | 19,453.8 | 19,743.2 |
| Gross profit | 3,807.0 | 3,939.0 | 3,961.0 | 4,061.9 | 4,181.0 | 4,246.1 |
| SG&A expenses | 3,375.0 | 3,294.0 | 3,931.0 | 3,707.4 | 3,750.8 | 3,795.1 |
| Research and development | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other operating expenses (income) | -356.0 | 3.0 | -224.0 | -4.6 | -9.5 | -9.6 |
| EBITDA | 866.0 | 814.0 | 916.4 | 1,029.5 | 1,103.0 | 1,122.8 |
| Depreciation | 662.0 | 634.0 | 636.0 | 639.1 | 629.7 | 624.4 |
| EBITA | 126.0 | 8.0 | 280.4 | 390.4 | 473.4 | 498.4 |
| Amortisation of intangible assets | 21.0 | 29.0 | 26.4 | 31.3 | 33.7 | 37.8 |
| EBIT | 105.0 | -21.0 | 254.0 | 359.2 | 439.6 | 460.6 |
| Financial result | -56.0 | -21.0 | -166.0 | -136.2 | -116.2 | -116.2 |
| Recurring pretax income from cont. operations | 49.0 | -42.0 | 88.0 | 222.9 | 323.4 | 344.4 |
| Extraordinary income/loss | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Earnings before taxes | 49.0 | -42.0 | 88.0 | 222.9 | 323.4 | 344.4 |
| Taxes | -81.0 | -5.0 | 11.0 | 22.3 | 64.7 | 74.0 |
| Net income from continuing operations | 130.0 | -37.0 | 77.0 | 200.6 | 258.7 | 270.3 |
| Result from discontinued operations (net of tax) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net income | 130.0 | -37.0 | 77.0 | 200.6 | 258.7 | 270.3 |
| Minority interest | -4.0 | -2.0 | -1.0 | -6.0 | -7.8 | -8.1 |
| Net profit (reported) | 126.0 | -39.0 | 76.0 | 194.6 | 250.9 | 262.2 |
| Number of Shares | 400.78 | 485.22 | 485.22 | 485.22 | 485.22 | 485.22 |
| EPS reported | 0.31 | -0.08 | 0.16 | 0.40 | 0.52 | 0.54 |
Source: Company data; mwb research
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