(MENAFN- ProactiveInvestors - UK) It's January, which means Christmas trading updates from the major retailers and some gloves-off January sales action, notes Exane BNP Paribas.
Among the supermarkets, it reckons Wm Morrison Supermarkets PLC (LON:MRW) might emerge as the surprise winner, despite it going up against some tough comparative figures from a year earlier.
On the other hand, the French bank notes, Morrisons has a few disappointing Christmas periods to catch up on, and it reckons it could bounce back with a 1.5% like-for-like (LFL) year-on-year sales increase.
Expectations for Tesco PLC (LON:TSCO) are high, and Exane reckons the fiscal third quarter for the sector leader will have been good, with a 2.0% LFL sales increase. The Christmas comparatives will be tougher, however, so Exane has pencilled in a 0.5% LFL increase, which could disappoint, Exane suggests.
'Market share data would suggest Sainsbury's run of weaker form is easing but we still pencil in a -0.8% Q3 LFL,' Exane said.
The grocers ended 2016 with the wind in their sales/sails, but 2017 could be tougher, the bank reckons.
'The reflation trade and steeping of the yield curve favours stocks with a little more rock and roll like the food retailers, so relative to the consumer staples, they finished 2016 with a bit of flourish. It doesn't take a lot to upset relative out-performance in food retail, however, and we suspect we'll start 2017 talking about price cuts. Typically it's ASDA's rhetoric that launches the discussion on a price war and though actual price cutting may be subdued, that doesn't stop the headlines,' Exane concluded.
Of the big names in the sector it rates Morrisons, Tesco and Booker Group PLC (LON:BOK) as holds and J Sainsbury plc (LON:SBRY) as a buy; Ocado Group PLC (LON:OCDO) gets the thumbs-down.
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