Tesco PLC (LSE:TSCO) and B&M European Value Retail (B&M European Value Retail SA (LSE:BME)) are potential 2023 winners, according to JPMorgan, as European food retailers battle with a changing mix, Covid volume unwinds, down trading and increased costs.
Analysts at the US bank believe the low-end grocery retail sector is “well positioned to navigate 2023” due to stronger execution, less complacency, more rational markets and an enhanced mix.
JPMorgan said the low-end retailers are gaining traffic from the high-end, “triggering us to place B&M and Tesco on positive catalyst watch.”
Despite inflation remaining elevated and World Cup tailwinds, JPMorgan believes the sector is well-placed to outperform.
“We conclude that is easier to ‘defend the defensiveness’ of the business models nowadays compared to 2008, given lighter non-food and higher private label exposure, a somewhat contrarian view in light of current investor positioning and sector value,” it said.