2 top FTSE 100 bargain shares to buy now

As the FTSE 100 tumbles, Zaven Boyrazian identifies two UK shares delivering strong profits and that are starting to look cheap.

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The FTSE 100 has been fairly resilient during the ongoing market downturn, but some constituent shares haven’t fared so well. In fact, quite a few have been hit hard, dropping by double digits in recent weeks.

Yet, while plenty of investors are panicking, I’m looking for some buying opportunities. And I may have just found some.

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Consumer staples to the rescue

Among the most popular FTSE 100 shares that stand out is Tesco (LSE:TSCO). It’s a boring business, that’s for sure. But during times of heightened inflation, consumer staple companies tend to outperform. After all, people still need food and water.

With the impact of Covid-19 costs now out of the picture, profitability has recovered to pre-pandemic margins. Thanks to continued sales growth, courtesy of recapturing market share, operating profits now sit significantly higher. And management has since been able to wipe out approximately £1.4bn of net debt from its books.

Over the last 12 months, Tesco shares are still up around 20%. But skip ahead to 2022, and they’ve been sliding by 10% since February. What happened?

The company issued less than impressive profit guidance for its 2023 fiscal year ending in February. As consumers seek to reduce costs, discount retailers are gaining increased popularity. And to remain competitive, management is extending its special offers to retain its market share.

In other words, margins are expected to suffer moving forward. But with this factor now priced in, I believe Tesco shares are trading at a decent discount, making them an attractive potential addition to my portfolio.

Shares of another FTSE 100 business on sale

Tesco is obviously not the only supermarket in town. And B&M European Value Retail (LSE:BME) is another FTSE 100 company whose shares are looking rather attractive right now. At least, that’s what I think.

The company owns and operates a network of 1,110 discount retail stores across the UK and France. Sadly, the stock has taken quite a beating, dropping 26% since the start of 2022, pushing its 12-month return to -17.5%. It seems the latest earnings report did not satisfy investors with flat top-line growth.

So why do I think this is a bargain? The top-line performance may be underwhelming, due to tough comparables. However, from a profits standpoint, things are looking interesting. Management’s strategy to focus on higher-priced, higher-margin products, even during a time of inflation, seems to be working. In fact, full-year earnings guidance was recently lifted to £605m-£625m versus analyst expectations of £578m.

I have some concerns about the latest announcement that its CEO of 17 years, Simon Arora, will be stepping down in 2023. Finding a suitable replacement will undoubtedly be a challenge that may serve as a potentially disruptive distraction for the rest of the leadership team. Yet, given the recent price tumble and solid outlook, I feel this is a risk worth taking for my portfolio.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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