Turkish Food Retailers See Slower Traffic, Margin Pressure, but Valuations Remain Attractive

Turkish food retailers entered 2025 with softening traffic trends as consumer spending power weakens and the disinflation program takes hold. According to sector analysis for 1Q25, like-for-like (LFL) traffic fell across all three major players — Migros, BIM, and Sok — driven by weaker household demand and a high base effect.

Declining Real Growth Despite Promotions

Even though promotional activity remains high, real top-line growth (adjusted for food inflation) has been in decline since 3Q24. Migros slightly outperformed peers, gaining market share, while Sok began to recover from a weaker base.

BIM, facing challenges from lower inflation in basic goods, may benefit from expanding its product count to 1,000 from 900, potentially supporting basket growth.

A meaningful real LFL recovery is expected to remain elusive in the short term, largely due to the ongoing disinflationary policies impacting consumer demand and pricing power.

Margins Pressured, But Leverage Offers Medium-Term Relief

Sector gross margins remain stable to slightly pressured by promotional intensity. Operating expense (opex) burdens are front-loaded in 1H25, following a 30% minimum wage hike earlier this year. Further voluntary wage hikes, if implemented as in previous years, could compress margins — though they might help preserve consumer spending.

• Sok showed an improvement in opex-to-sales in 1Q25, and analysts forecast a 20bps EBITDA margin recovery in 2025e.

• BIM and Migros, on the other hand, are expected to see c20bps margin contraction year-on-year.

Cash Flow Volatility to Persist

1Q25 cash flows were volatile across the board, impacted by one-off factors (e.g., holiday bonuses, delayed receivables) and working capital adjustments, particularly the normalization of payable days for BIM and Sok.

These one-offs may reverse in 2Q25, with Migros potentially benefiting most. Still, 2H25 cash flows could remain under pressure due to weaker profit trends and continued capital expenditures.

All Three Stocks Retain ‘Buy’ Ratings

Despite near-term operational pressures, all three companies maintain undemanding valuations, justifying a Buy stance:

• Migros is highlighted as a diversified grocer, serving all consumer segments with a digitally robust platform.

• BIM is seen as the most resilient player in Türkiye’s consumer sector, bolstered by the scaling potential of its FILE format.

• Sok offers the most upside potential, driven by margin recovery and a better earnings tone in its latest results.