Boston, MA -- (SBWIRE) -- 08/01/2012 -- Our Europe team has a below-consensus view on Polish GDP growth for 2012. Retail sales data suggest that private consumption is already weakening. Commentators have focused on headline nominal retail sales growth in Q112, which grew by 12.9% on Q111, but missed less impressive volume numbers, which increased only 0.4% year-on-year (y-o-y) in Q112. Inflation, and the lagged effect of a weak zloty in H211 on import prices in particular, explain much of this difference. According to an Ipsos-Demoskop survey, consumer confidence is also highly negative, although registering an improvement in March, however, where there is value to be had, like in the fast-growing discount space, strong growth is still anticipated.

Headline Industry Data

- 2012 per capita food consumption growth in local currency = 3.9%; forecast compound annual growth to 2016 = 5.3%.
- 2012 beer volume sales = 0.1%; forecast compound annual growth to 2016 = 1.5%.
- 2012 mass grocery retail sales growth in local currency = 6.8%; forecast compound annual growth to 2016 = 8.4%.

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Key Industry Trends

Jeronimo Martins Q1 Earnings Up, But Share Price Down: Portugal-based food retailer Jeronimo Martins has reported first-quarter earnings that have come in slightly below consensus expectations. Shares in Jeronimo were down - selling off by about 10% over the past five days - on the news that the firm recorded earnings of EUR71.6mn in Q112, EUR3.6mn below consensus.

Jeronimo had a strong start to 2012 on the back of excellent growth out of Poland in particular. The below-consensus results can be attributed to the challenging operating environment in Portugal; however, the Polish growth story remains intact. Indeed, Jeronimo owns Poland's leading soft discount chain, Biedronka, and the country now accounts for more than 60% of Jeronimo's business. Sales at Biedronka, of which there are now nearly 2,000 stores in Poland, were up 13.1% y-o-y in Q112, to EUR1.51bn. Like-for-like sales were up by 9.5% y-o-y, which in our view is particularly encouraging, especially for Jeronimo.

Tie Up Between Russian Standard And CEDC Could Create Regional Vodka Giant: In February 2012, Russia-based vodka producer Russian Standard made an offer to Poland-based Central European Distribution Corp (CEDC) that could see it take a 32.99% stake in the business. CEDC is under pressure due to concerns over its large debt pile, with US$207mn of its debt due in 2013. Russian Standard currently owns 9.9% of the business and is also an important debt holder. The proposed deal would see Russian Standard exchange US$103mn of CEDC debt for common stock at a price of US$7 per share. This would give it a 25% stake in the business and the second part of the deal would see it increase its stake to 32.99% by buying stock.

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