Broker snap: JPMorgan cautious on food retail, Tesco downgraded

30th May 2013 09:13

JPMorgan Cazenove has downgraded its rating for supermarket giant Tesco from 'overweight' to 'neutral' and slashed its target price from 425p to 390p, saying that sector fundamentals are weighing on the investment case.The broker said that the basis for its move was to be "more consistent with our cautious view on the UK food retail market as a whole, of which Tesco represents 30%". JPMorgan said that sector fundamentals remains "unattractive" for a variety of reasons: "4.0% space growth; flat volumes; private players taking 80 basis points (bp) of market share; online taking another 80bp, industry profitability at an all-time high, potential implication on supermarket property prices."All of these "do not bode well for the industry and, as a result, for Tesco", the broker said.For the company's first quarter of the year ending February 2014, the broker expects like-for-like sales to decline by 0.4% in the UK, by 5.0% in the Rest of Europe and by 4.0% in Asia.The stock was down 1.92% at 365.85p by 10:09.