Stock exchange analysts are a fan of European supermarket chains again. The fear for Amazon is an exaggeration and the food industry has received too much negativity, according to fund managers’ forecast of 2018.
Exaggerated fear for Amazon
A large number of share funds will focus on supermarket companies in 2018 once more. The food industry’s reputation took a large hit, according to Old Mutual Global Investors’ European fund manager Ian Ormiston at a stock investor briefing in London. His fund has shares in both Ahold Delhaize and Carrefour.
Even there is more competition, Amazon’s impact is overrated, according to the investors. Aldi and Lidl are a larger threat to the supermarket world than the Seattle-based online retailer.
Ahold Delhaize performs better than its share
“In many other sectors, people are quite right to fear Amazon because of price deflation, because they are more efficient because of their buying power. I don’t think their game in food, if we look at what they bought, is about price,” Ormiston explained to Bloomberg. The investor points to the Whole Foods acquisition and its premium price position.
Other portfolio managers in London agree that Amazon’s impact on the European supermarket industry will not be felt anytime soon. Particularly food retailers with physical stores will not feel Amazon’s reach for now. Ahold Delhaize suffered on the stock exchange in the past few months, but according to analysts it is doing better than the stock exchange seems to indicate. Considering it plans to buy back two billion euros’ worth of its own shares in the next year, the share should be a winner in 2018.
Carrefour should increase volumes
Ormiston feels supermarket companies need to work with suppliers in new ways in order to ease the price and margin pressure. Carrefour’s purchase alliance with Fnac Darty is a step in the right direction, because it can also lead to long-term store space efficiency.
Some stock exchange analysts are still fearful about Carrefour’s transformation plans, which will be revealed in January. It would be a bad idea to cut more costs, because the French supermarket group is still losing volume and market share at this point. Its turnover growth should be boosted because only when the company can stabilize and then grow volumes, cost-cutting measures will have an effect. If that is not the case, Carrefour may end up in a negative spiral.
