European food delivery firms face forecast cuts as inflation surges, says J.P. Morgan

(Reuters) – European meals supply corporations can be pressured to slash their forecasts within the second half of the yr as record-high inflation and rising borrowing prices take a toll on shoppers, analysts at J.P. Morgan mentioned on Monday.

The brokerage mentioned meals supply has up to now not been “stress examined” in a recession, however views the sector as extremely discretionary and expects a pointy drop in orders.

The outlook comes amid Euro zone inflation touching a document 8.1% final month — greater than 4 occasions the European Central Financial institution’s goal — and a forecast of British households’ actual disposable incomes probably falling 2.2% this yr. That will be the biggest decline since data started within the Nineteen Fifties.

The Organisation for Financial Co-operation and Growth too mentioned earlier this month that Britain’s economic system will stagnate in 2023 within the face of excessive inflation.

J.P.Morgan mentioned on Monday the atmosphere for meals supply stays powerful as a consequence of rising yields, troublesome yearly comparisons, quickly rising labour prices, and more and more tighter client budgets.

“Traders’ hopes for a greater H2 are prone to stay unfulfilled as excessive inflation and rising borrowing prices are beginning to drive deteriorating client budgets,” JPM analyst Marcus Diebel mentioned.

To tame surging inflation, world central banks are dashing to boost rates of interest, with the U.S. Federal Reserve final week approving its largest fee hike in additional than 1 / 4 of a century.

The rising charges, nonetheless, have additionally sparked fears of a recession in main economies amid an atmosphere of slowing world progress and waning client demand.

Diebel downgraded Deliveroo to “underweight” from “impartial” as he expects the corporate to be most susceptible to fading client demand, and have the longest path in direction of group profitability.

(Reporting by Aniruddha Ghosh in Bengaluru; enhancing by Uttaresh.V)