J.P.Morgan sees weaker European food retail in 2024/25

Metro AG

01/12/2023 08:31

** J.P.Morgan expects disinflation to continue impacting
sales and margins of the European Food Retail sector in 2024/25 
    ** JPM says nothing structurally improved in food retail in
2020-23, whilst some companies now appear to be over earning
    ** The broker downgrades Tesco  TSCO.L  and Metro  B4B.DE 
to "underweight" from "neutral", contributing to a total of six
sector stocks rated as "underweight" and only Colruyt  COLR.BR 
at "overweight"
    ** It sees its "cautious sector stance" underpinned by U.S.
grocers having missed expectations, and food producer prices
entering "negative territory", emphasizing deflationary risks
    ** "The sector still has outperformed in relative terms and
looks far from cheap" - JPM
    ** The broker deems Metro's revenue growth and outlook as
disappointing, justifying a price target with a 16% downside
potential
    ** It adds that Tesco downgrade is based on the company's
likely inability to sustain its outperformance which was linked
to temporary executed self-help and macro tailwinds
    ** The Metro stock has dropped by 32.66% since the beginning
of the year while Tesco has gained 27.48% YTD

 (Reporting by Chiara Holzhaeuser)
 ((Chiara.holzhaeuser@thomsonreuters.com))