Russian retailers face painful 'paradigm shift' in short term but no existential threat - JPM

Fix Price

10/03/2022 06:58

** JPMorgan says Russian retailers face a short-term pain of
"paradigm shift" but they will likely adapt to the new reality
by revamping assortment, switching to private labels across all
product categories and developing value formats
    ** The brokerage still slashes its target prices by 55-75%
across the sector and 2022-23 earnings forecasts by up to 50% to
reflect the surge in cost of capital and FX depreciation for
GDRs
    ** Food and value retail appear more defensive in the wake
of economic turbulence, JPM says
    ** It adds that among non-food players low-cost retailer Fix
Price  FIXPq.L  has the lowest assortment risk given lower
reliance on multinational suppliers
    ** "Strong companies get stronger during the crisis. There
is no imminent existential threat for listed Russian retailers
and most of them are likely to gain market share in their
categories with food being most defensive," JPM says
    ** It sees, however, high likelihood of retailers cutting
capex and dividends, using available cash to repay near-term
debt
    ** JPM rates Magnit  MGNT.MM , X5  PJPq.L , Fix Price and
Detsky Mir  DSKY.MM  "neutral" as it expects profitability to
normalize after several challenging years, even if at a lower
level than previously anticipated
    ** It cuts consumer electronics retailer M. Video  MVID.MM 
to "underweight" from "neutral" as it expects it to be more
severely impacted by higher funding cost and supply disruptions
in 2022-23

 (Reporting by Anna Pruchnicka)
 ((anna.pruchnicka@tr.com))