Now trading at 294p per share, B&M European Value Retail (LSE:BME) shares have lost 46% of their value over the past year. In that time, the discount retailer has tumbled out of the FTSE 100 and into the FTSE 250 share index.
B&M’s struggled badly in what’s been a tough time for UK consumers, resulting in the resignation of its then-chief executive in April and a steady stream of profit warnings since last year. The retailer slumped again yesterday (4 June) after a chilly market response to its full-year trading numbers.
As a long-term investor, though, I’m wondering if B&M could now be an irresistible recovery share to consider. While it still faces severe challenges, its shares now trade on a forward price-to-earnings (P/E) ratio of 8.6 times.
That’s below the five-year average of 11.5 times, and comfortably inside value territory below 10.
Here’s my verdict.
Sales reversal
In theory, value retailers like B&M should be thriving in times like this as shoppers trim spending. But like much of the high street it’s also hit upon hard times.
Revenues rose 3.7% in the 12 months to 29 March, the company said Wednesday. But this was thanks chiefly to new store openings (it cut the ribbon on 38 net new B&M UK outlets last year).
Like-for-like sales at B&M UK — which accounts for around 80% of takings at group level — slumped 3.1%, even worse than expected. Adjusted operating profit here dropped 1.3%, which, combined with a 39.3% reversal at Heron Foods, meant corresponding group profits dropped 1.8%.
Rather unhelpfully, the business didn’t release any commentary on trading since the start of the new year. But it did warn that financial 2026 will bring retail sector-wide challenges of increased minimum wage costs, higher employee National Insurance and other taxes, and inflation on input costs
All in all, then, it’s no wonder that B&M shares sank again following the release.
Under pressure
I’ve long taken a positive view of the former Footsie retailer and its long-term prospects. Growth has been stratospheric since the mid-2000s, underpinned by rising demand for value among consumers and the company’s rapid expansion programme.
B&M UK now has 777 stores in operation, and it’s targeting a total of 1,200 in the coming years.
Yet the company has substantial challenges to overcome, as rival Poundland’s decision this month to exit the UK illustrates. The prolonged squeeze on consumer spending looks set to continue as the domestic economy struggles.
The strain on consumers’ budgets isn’t the only problem, though. B&M operates in a highly competitive market where sales and margins are under constant pressure. Indeed, B&M UK’s adjusted operating profit margin declined to 11.8% last year from 12.4% previously.
And its lack of an online channel leaves it at a huge disadvantage to many of its peers.
Investors will be hoping incoming chief executive Tjeerd Jegen will turn the ship around when he arrives this month. The new man has held a range of leadership positions this century in places like Tesco, Woolworths, and more recently Accell Group.
But I’m not convinced that a turnaround could appear on the horizon any time soon. On balance, I’d rather look for lower-risk shares to consider today.
