Zabka Group (ZAB) Q4 2024 earnings summary

Executive summary

• Achieved a successful debut on the Warsaw Stock Exchange in October 2024, unlocking new growth opportunities and public market access.

• Opened 1,166 new stores, including 60 in Romania, and expanded digital and convenience offerings, marking a significant international milestone.

• Upgraded the Żabka App, launched a strategic partnership with Microsoft in AI, and achieved break-even in the digital customer ecosystem.

• Recognized as Retailer of the Year for the sixth consecutive time, received EcoVadis Platinum, and ranked as the second most loved workplace globally.

• Maintained robust like-for-like growth of 8.3%, slightly above the midpoint of the 7.5-9.0% target range.

Financial highlights

• Sales to end customers rose 20% year-over-year to PLN 27.3 billion, driven by store expansion and 8.3% like-for-like growth.

• Adjusted EBITDA increased 24% to PLN 3.5 billion, with a margin of 12.8%, at the upper end of the target range.

• Adjusted net profit surged 66% year-over-year to PLN 714 million, with a 2.6% margin, exceeding guidance.

• Free cash flow reached PLN 1.5 billion, over three times higher than the previous year, with a cash flow conversion ratio above 60%.

• Net leverage ratio (excluding leases) reduced to 1.5x EBITDA from 2.3x, supporting a deleveraging trend.

Outlook and guidance

• Plans to open over 1,100 stores in 2025, 10% ahead of midterm guidance, and maintain 1,000+ p.a. in the medium term.

• Targets mid to high single-digit like-for-like growth for 2025 and stable adjusted EBITDA margin at the top end of the 12-13% range.

• Adjusted net income margin expected to improve toward 3% in the near term and 4.5% in the medium term.

• Expects positive, but lower, working capital impact on cash flow in 2025 compared to 2024 due to non-recurring effects.

• Committed to doubling sales to end customers between 2023-2028.