On Wednesday, Jefferies issued a downgrade for Mercialys (MERY:FP) (OTC: MEIYF) stock, adjusting its rating from Buy to Hold. The firm also revised its price target to €12.50 from the previous €13.00.
The decision comes in response to news that Casino, a major tenant, will be closing stores in six of Mercialys' properties. This development has raised concerns about the potential impact on the foot traffic and revenue of other stores within these shopping centers.
The analyst from Jefferies pointed out that the closure of Casino's stores could jeopardize the turnover of other shops in Mercialys' assets. As a result, the firm has reduced its forecasts for funds from operations (FFO) by 1% for 2025 and 3% for 2026. Despite Mercialys' shares having risen by 22% year-to-date, the downgrade reflects the anticipated effect of earnings downgrades due to these closures.
Most of Casino's French hypermarkets had been sold to other food retailers, including Intermarché, Auchan, and Carrefour (EPA:CARR). Nonetheless, this week marks the definitive closure of 19 Casino stores, six of which are located in Mercialys' shopping centers, and two are owned by Mercialys directly. These owned stores represent 1.2% of the company's annual rents, which could signal a notable loss in rental income for Mercialys.
The analyst's comments highlight the specific risks associated with the store closures, which are expected to directly affect Mercialys' financial performance in the coming years. The revised price target of €12.50 is now set to mirror these concerns and the consequent earnings downgrades.
Investors and stakeholders in Mercialys are thus alerted to the potential challenges ahead, as the company navigates the impact of Casino's strategic store closures on its shopping centers' performance and rental income.
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