Europe’s Most Unloved Stock Is a Top-Performing Belgian Retailer

(Bloomberg) -- The most unloved stock in Europe’s benchmark for large companies is a Belgian grocery chain called Colruyt SA that was the top-performing retailer on the continent last year. The more the stock rises, the less analysts love it.

Colruyt shares slumped Wednesday after Goldman Sachs lowered its rating to sell from neutral. The downgrade brought to 16 the number of sells on Colruyt, which has only two holds and no buys, according to data compiled by Bloomberg. That makes it the lowest-rated stock in the Stoxx Europe 600 Index, with a consensus of 1.44 versus an average of 3.63 for the benchmark, on a scale where 1 equals sell and 5 equals buy, the data show.

The stock jumped 44% in 2018, the second-best performance in the Stoxx 600 Retail Index last year, behind only Ocado Group Plc. As of yesterday, Colruyt also was that index’s No. 2 winner for the past 12 months.

That analysts are unimpressed is an understatement. So why is the Street so bearish? Europe’s retailers are in trouble and most consider Colruyt too pricey.

“We see a combination of deteriorating market conditions and high valuation premium skewing risks to the downside,” Goldman analyst Rob Joyce wrote in the note detailing his downgrade.

Colruyt trades for about 25 times next year’s estimated earnings, Joyce said, 40% above both its own average multiple for the past decade and its average premium to the sector.

Still, the Belgian company “remains one of the highest quality” grocers in terms of return on invested capital and consistency of cash generation. Joyce said. That’s more than can be said about some other European retailers, more popular among analysts.

Analysts have an average price target of 43.57 euros, 32% below where the stock is trading. Colruyt lost 4.8% to 64 euros at 11:36 a.m. in Brussels.

--With assistance from Phil Serafino.

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Phil Serafino, Celeste Perri

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