JPM says it would sell food retail rally, cuts Carrefour

Jeronimo Martins SGPS SA

15/05/2024 12:12

** J.P.Morgan says it finds the recent rally in food retail
stock as "technical" and not necessarily driven by improved
fundamentals as margin reset, deflation risks persist 
    ** The sector has been pulled up -- about 10% in two weeks,
10% discount to historic level -- by the overall market rally,
it says, adding LFLs are yet to pull through while deflation
risk persists
        ** "Valuations do not reflect the risk of negative LFLs
& earnings downgrades in the ST (short term)," the broker says,
keeping its estimates for the sector 5-10% below consensus
expectations
  
    ** It cuts Carrefour  CARR.PA  to "underweight" from
"neutral" citing worsened fundamentals, as margin maximization
strategy resulted in severe market share loss
    ** Ahold-Delhaize's  AD.AS   U.S. performance remains
"underwhelming", the broker says, while it expects B&M's
 BMEB.L  implied H2 margin trends and 2025 outlook to disappoint
the market, and keeps its "underweight" rating on both
    ** It places the three stocks on its "Negative Catalyst
Watch"
    ** JPM keeps "overweight" on Jeronimo  JMT.LS  and Colruyt
 COLR.BR  saying both companies have reset their margins, which
it considers "a key premise to own food retail stocks" 
    ** "The two only companies that have sustainably created
value organically in the space over time," it adds

 (Reporting Clement Martinot)
 ((Clement.martinot@tr.com))