...] Operating Performance Stabilises but Deleveraging Remains Limited European food retailers are benefiting from low but steady like-for-like (LFL) sales growth and a stabilisation in profitability driven by the first positive results of expensive business model transformations, together with slightly improved consumer confidence. We expect operating margins to stabilise, but at a low level as strong promotional activity offsets aggressive cost control. Moreover, FCF should remain constrained by continuing investments in store refits and refurbishments (as opposed to space expansion), and in IT systems and logistics. What to Watch Low LFL in Core Markets: After a recovery from 3Q15 we expect European food retailers' LFL sales in core countries to decelerate and stabilise at low levels from 2017. Across most European countries, price pressure remains strong while volume growth is limited. Geographic Diversification: Both Carrefour and Casino will enjoy a growing sales contribution from Brazil...
