As like-for-like sales continue to fall, is the B&M European Value Retail SA (LSE:BME) share price a bargain?

B&M European Value Retail is known for its low prices, but could growing like-for-like sales make the share price the biggest bargain of the lot?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The B&M European Value Retail SA (LSE:BME) share price is moving higher after its latest results on Thursday (14 November). But the report itself was… mixed.

Created with Highcharts 11.4.3B&M European Value PriceZoom1M3M6MYTD1Y5Y10YALL14 Nov 201914 Nov 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The company’s update included a 3.7% increase in overall revenues, operating profits down 2%, and 20 more stores during the three months ending in September 2024. However, the key metric was like-for-like sales.

Should you invest £1,000 in Unilever right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Unilever made the list?

See the 6 stocks

Comparable sales

Like-for-like revenue growth is important for any retailer. According to B&M’s website, every 1% increase in this metric is the equivalent of opening seven new stores – but without the costs. 

In its July update, the firm reported a 5% drop in like-for-like sales, for which management blamed unusually bad summer weather. The latest report shows the decline continuing, albeit at a slower rate.

Today’s update revealed a 1.9% drop in like-for like sales, which is a clear improvement on the previous report. But while that’s a step in the right direction, ultimately it’s still a decline.

The company’s ability to generate higher revenues from its existing stores is so important. After July’s disappointment on this front, the latest result is somehow both encouraging and concerning.

Negative catalysts

In September, JP Morgan added B&M to its ‘negative catalyst watch’ list. And it’s fair to say there are some clear short-term risks with the stock. 

Most notably, cost-of-living pressures in the UK have been starting to ease. Inflation has fallen from 4% at the start of the year to 1.7% in September.

That should help alleviate some of the pressure on margins. But in an industry with no real switching costs, it creates less incentive for consumers to stick to discount retailers.

These concerns have attracted a non-trivial short interest of 3.25% in B&M. So there was a lot at stake going into the latest update. 

Where are we now?

The latest earnings report indicates that things are moving in the right direction after the July update. And the stock is responding accordingly.

I have B&M on my list of FTSE 100 shares to keep a close eye on. Even after the latest move, I think there could well be good value here, especially with the firm readying its inventory for a strong end to 2024. 

The company thinks it still has scope to increase its UK store count, as well as expanding in France. If it can do this, I would expect further growth ahead.

While things are still challenging, a price-to-earnings (P/E) multiple of around 11 doesn’t seem excessively demanding. And a dividend yield close to 4% is also attractive.

The key metric

While B&M thinks it has plenty of room to increase its store count, it won’t be able to do this indefinitely. And even though its new outlets have a very fast payback period, they still increase costs.

That’s why like-for-like sales growth is so important. Yes, the latest earnings report presents a mixed picture, but I still think the stock is cheap enough to be worth considering.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

JPMorgan Chase is an advertising partner of Motley Fool Money. Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »