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