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

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** 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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