EU CONSUMER STAPLES: Consumer & Transport: Week in Review

IG held firm even as HY widened 10–30bps, opening interesting RV across the IG/HY divide. Potential rising stars like Levi’s start to screen value, while pressure builds on earnings for at-risk HY names such as Electrolux and Coty. Next week’s earnings calendar is light but includes key names LVMH, Pernod and Nestlé.

• Südzucker reported 2Q results a month after cutting FY guidance and still guided toward the lower half of the range. Cash flows were supported by WC measures, but we still see leverage rising ~2x this year on continued earnings falls.
• Flutter fell another 4% as excitement around growth in prediction-markets continued; NYSE owner ICE took a $2bn stake in Polymarket, valuing it at $8bn, while Kalshi raised $300m at a $5bn valuation—more than double the valuation from earlier this year.
• Pandora is facing a historic rise in silver. High hedging levels will delay the impact, but we estimated a 250bps headwind on the 24% medium-term EBIT margin target if Silver held at $50/oz. We still view the credit as a firm name but see catalyst skewed negative now.
• Pepsi posted LSD organic growth, driven by international beverages and LATAM food. NA volumes—especially in foods—remained weak. Activist Elliott was expected to push for NA brand divestitures.
• Barry Callebaut estimates were revised by us with leverage lowered ~0.8x on better realised cocoa prices. Softer cocoa (on higher farmer prices and favourable weather) could help Barry preserve IG ratings.
• B&M reported LFL falls with margin targets reset 200-300bps lower as the new CEO targets more aggressive pricing. We await the Nov update to firm up a view.
• Levi raised FY guidance again on continued high-single digit organic growth. Strength in non-core Women’s and bottoms should be taken positively by agencies. We see rating upside and see levels as interesting.
• Groupe SEB cut guidance again as 3Q sales turned negative.
• Mars acquisition of Kellanova is set to receive EU regulatory approval according to Reuters leaks. If so it would unlock a 3-notch upgrade for K bonds and remove the 101 SMR risk on newly issued USD bonds.
• Pernod Ricard held onto Baa1 ratings at Moody’s. The agency points to €7b in aged inventories as support for credit. We note growth has lagged peers and still see near term catalyst skewed negative.
• Woolworths was reaffirmed at Baa2 Stable at Moody’s as the agency, like S&P, notes ample rating headroom. We see levels as interesting but near term catalyst skewed slightly negative.
• VFC was affirmed at BB flat by S&P  in a more optimistic take than Moody’s. Company schedules earnings for 28 Oct.
• Primary (NIC in brackets): Autostrada Torino-Milano 6.3y (+2), Tesco 8y (+3)