Jefferies downgraded Mercialys SA to a Hold rating from Buy on Tuesday, citing a deceleration in rental growth and a share-price performance that has exceeded that of the retail sector. The broker established a price target of €13.50, roughly 5% above the stock's most recent close of €12.84.
Mercialys, a Paris-listed owner and operator of shopping centres anchored by hypermarkets across France, has risen 17% year-to-date, compared with a 9% gain among its retail-sector peers. Jefferies flagged that the stronger relative performance reduces near-term upside absent renewed operational momentum.
Rental and trading trends
Like-for-like rental growth slowed to 2.0% year-on-year in the first quarter, down from 2.8% for full-year 2025 and from 2.7% in the first quarter of 2025. The broker noted a -0.1% effect from indexation in Q1 versus a 2.3% indexation contribution in FY25, weighing on headline rental increases.
Jefferies attributed part of the rental weakness to liquidation proceedings at four apparel retailers - Kaporal, Jennyfer, IKKS and Naf Naf - but observed that no single brand represents more than 2% of Mercialys' rental base and that the four firms together account for no more than 3% in total.
Occupancy metrics showed a modest deterioration early in the year. The vacancy rate increased by 40 basis points from December 2025 to 2.4%. Management told investors it had largely anticipated the departures and expects vacancy to decline to around 2% over the course of the year.
On consumer metrics, tenant sales for January through March 2026 rose 2.2% year-on-year, below the 2.6% reported for FY25. Jefferies pointed to March as a softer month, mentioning the impact of the Middle East conflict on inflation and purchasing power. By contrast, January-February tenant sales were stronger, up 2.4% and running 300 basis points ahead of the national index. Footfall improved by 3.9% year-on-year in Q1, 290 basis points above the national index.
Transactions and capital structure
In April, Mercialys acquired a retail park in Toulouse Fenouillet for €18 million, including real estate transfer taxes. Jefferies estimated the yield on that acquisition to be approximately 8%.
On the balance sheet, Mercialys completed repayment of a €300 million bond that matured in February. The company does not face another financing maturity before November 2027, providing some runway for capital planning.
Jefferies revised its financial expense estimates for 2026-2028 lower, reducing aggregate financial expenses from €102 million to €92 million and using a normalised cost of debt of 3.8% compared with its prior 4.2% assumption. That reduction in financing costs increased Jefferies' earnings-per-share forecasts by an average of 3%.
Forecasts, guidance and valuation
The broker now projects 2026 EPS of €1.30, up from its prior estimate of €1.29. Revenue is forecast at €191.6 million and EBITDA at €159.6 million. Mercialys has confirmed its FY26 guidance for net recurring EPS of "above €1.29."
Jefferies notes the stock is trading at 9.9x P/FFO on 2026 estimates and at a 26% discount to estimated 2026 net tangible asset per share of €17.30. The broker said that a further rerating would be contingent on stronger momentum in rental uplifts, occupancy and accretive acquisitions.
Implications
Jefferies' downgrade reflects a reassessment of the balance between improved cost-of-debt assumptions and softer operational data in Q1. The broker's view leaves limited upside from current levels absent clearer evidence of accelerating rental growth, lower vacancy and earnings-accretive property deals.