COVID-19 will have an uncertain but important impact on Greggs' profitability in FY20. The profit and cash flow impact of lost sales will be mitigated by internal initiatives and government support on operating costs (rates and employees). The strong balance sheet means that Greggs is well placed for tougher times. Our forecasts are now under review and we are planning to publish a note to update them shortly.

Greggs

• 24 Mar 20
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Ocado remains mired by its capacity constraints in the retail business. While the Q1 performance was unsurprising, the company is struggling to cope with the sudden spike in consumer demand due to the outbreak of COVID-19. We remain positive on the strength of the business model but one should wait for a better entry point in the stock.

Ocado Group

• 23 Mar 20
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Galenica reported FY19 adjusted operating profit of CHF166.9m, in line with consensus but missing our estimates. The strong profit growth in Health & Beauty (+12.1%) was partly offset by a soft performance in services (+1.1%). The company announced a dividend of CHF1.8/share. For FY20, management expects topline growth of 1-3%, adjusted operating profit growth of 3-6% and dividend at least equal to the FY19 level. We expect minor downward revisions in our estimates and target price.

Galenica

• 12 Mar 20
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Tesco has announced the disposal of its Asian business to CP Group, the largest conglomerate in Thailand. The $10.6bn cash deal (equivalent to £8.2bn) tops the market’s expectations and a healthier balance sheet should help Tesco to tackle better the increasing competition on its domestic turf. We remain positive on the stock.

Tesco

• 09 Mar 20
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Tesco has announced yet another bold move to stay afloat / preserve market share in the tough UK grocery market – management plans to price-match Aldi on hundreds of essential products. Improved price perception is the aim but profitability erosion is also a likely side-effect. While Tesco is better placed (enjoys 2x operating margin) vs close peers, this step may not be enough to plug the customer leakage completely. The competition will only intensify henceforth.

Tesco

• 05 Mar 20
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Greggs’ FY19 PBT was 1% ahead of our expectations and current trading suggests it will continue to take market share in the growing food-on-the-go market. Greggs has many opportunities to accelerate growth in the medium term: more and larger stores; the shift from a single channel to multichannel; further product innovation; and more investment in its supply chain, funded by strong cash generation. There is near-term risk, as with the sector in general, if the coronavirus results in people staying away from public places. Our PBT forecast for FY20 increases by 2% and our DCF-based valuation increases by c 4% to 2,188p.

Greggs

• 04 Mar 20
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Two positive developments have been reported for Groupe Casino / Rallye. A Paris court has approved the safeguard plan and Daniel Kretinsky has agreed to provide up to €233m as a loan to refund the derivative deals Rallye had sealed with the financial institutions. With this development, Casino will now be under less pressure to resume the dividend payments to Rallye, in the forecast years.

Casino Guichard Perrachon

• 03 Mar 20
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Carrefour’s strong closure to FY19 and further improvement in the cost savings plan are positive developments. We remain optimistic on the potential of Mr Bompard in turning around the operations, especially in Europe. The company needs to be more aggressive in achieving the e-com target of €4.2bn by 2022 (vs €1.3bn in 2019). Positive opinion maintained on the stock.

Carrefour

• 27 Feb 20
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Casino’s Q4 performance was impacted by pension strikes in France. Recent controversy about parent entity Rallye’s debt repayment proposal has also dented the investor sentiment. While we do not see any structural issue in the French operations, the company is also well-enough equipped to aid its parent to honour the obligations (considering the plan is approved by the court). We continue to believe in management and maintain a positive stance on the stock.

Casino Guichard Perrachon

• 29 Jan 20
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