Bernstein has singled out a subset of European food retailers it views as attractive investment opportunities over the coming 6-12 months, based on the way inflationary dynamics are influencing purchase behavior and pricing power.
The firm notes that producer inflation is largely passed on to shoppers because retailers cannot absorb those cost increases. At the same time, Bernstein points out that consumers frequently limit their exposure to higher prices by shifting purchases toward discounters or private label products, effectively dampening the net impact of inflation at the household level.
Given this backdrop, Bernstein prefers chains with established private label programs and with pricing that is competitive relative to in-market leaders. Those attributes, the firm argues, make certain retailers better positioned to retain or grow share as shoppers seek value.
Names highlighted
1. Tesco - Bernstein views Tesco as the most defensive exposure to the inflation theme within European food retail. The firm emphasizes Tesco’s robust private label assortment and its competitive pricing as central advantages in an environment where consumers are prioritizing value amid rising prices. In a recent corporate update, Tesco PLC reported a 6% rise in headline earnings per share for the second half of fiscal year 2026 and a 12% increase in free cash flow.
2. Jeronimo Martins - The Portuguese retailer is identified as offering the most compelling inflection story at a trough multiple, in Bernstein’s view. The firm cites Jeronimo Martins’ strong private label presence and competitive price stance as features that should resonate with shoppers who trade down to more affordable options during inflationary periods.
3. Marks and Spencer - Bernstein expects Marks and Spencer to display resilience and to benefit from current conditions. The firm references M&S’s transformation efforts and its competitive positioning as factors that should help the retailer manage shifts in consumer behavior caused by elevated price levels.
Investment horizon and framing
Bernstein’s recommendations are explicitly framed around a 6-12 month outlook and are grounded in how the firm expects inflation pass-through and consumer trade-down behaviors to play out in grocery markets. The common thread across the selected names is a combination of private label strength and the ability to compete on price versus local peers.