Analysts Bernstein Research have identified three retail stocks for investors to focus on in the coming year; citing Sainsbury's, Ahold Delhaize and Tesco as 'ones to watch'.
Bernstein said that 2017 is likely to see 'superior earnings growth combined with further valuation normalization', with many 'recovery' stories now completed.
'Therefore, 2017 investment performance will be driven by earnings, earnings growth expectations, and the valuation discount further narrowing,' it said.
On Sainsbury's, Bernstein noted that the UK retailer has 'most to gain from a valuation catch-up', while Ahold Delhaize 'should have sufficient demonstrable progress to enable the next step-up in valuation'.
Towards the end of the coming year, post its H1 results, Bernstein reckons that Tesco will 'be further up the margin curve, have more cash, possibly announce a dividend strategy and probably be boosted by higher yields reducing its pension deficit'.
Other retailers that could catch the eye include Casino (where 'it will take a clearly communicated simplification strategy, and time, to make the stock work'), Carrefour, Metro and Morrisons.
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.
