After taking quite a tumble in 2025, FTSE 250 stock B&M European Value Retail (LSE:BME) now offers a pretty juicy 6.7% yield. And at a price-to-earnings ratio of just 7.1, this value retailer’s starting to resemble a deep-value opportunity for long-term investors. But is there more to this story?
What happened to B&M?
Since the start of the year, B&M shares are down a painful 37%. This is a continuation of the group’s downward streak that started in 2024, which lost B&M’s status as a FTSE 100 company. And subsequently, investor sentiment’s crumbled.
To be fair, there are some justified concerns to be had with this retailer. Like-for-like sales have increasingly gotten weaker, while profit margins are feeling the pinch of higher labour costs driven by the increase in the National Minimum Wage. This has only been made worse by the drop in average ticket prices as shoppers steer away from its more profitable higher-price products in favour of lower-margin groceries and necessities.
That’s a bad combination when there’s close to £2.6bn of debt on the balance sheet versus only £217m in cash reserves. And while operating profits are still more than sufficient to cover both interest and dividends, that could change in the future if the slowdown in sales stems from market share losses against competitors like Aldi and Lidl.
A hidden buying opportunity?
This isn’t the first time B&M has experienced a cyclical slowdown within its business. And even with the recent pressures on profitability, the group still boasts some of the highest margins in the retail sector.
New leadership’s been brought in to get growth back on track as well as introduce numerous operational improvements to fix both the top and bottom line.
Obviously, better efficiency and a more optimised product mix could start sparking fresh growth. And with the stock priced so cheaply, even a modest bit of growth could be all it takes for investor sentiment to start improving. And based on the group’s latest trading update, that could be just around the corner with UK and international stores delivering 4.7% and 7.6% like-for-like growth respectively.
Needless to say, that’s an encouraging sight, especially as the business moves closer towards its critical Golden Quarter in the coming months.
The bottom line
B&M still has plenty of challenges to overcome. And the fiercely competitive landscape won’t make things easy. Yet, the sell-off in shares seems a bit overblown considering the impressively cash-generative and high-margin nature of this operation.
Given the substantial investor pessimism surrounding this business, it might take a while for the share price to recover. But if management hits its operational milestones and growth continues to creep back up, this FTSE 250 stock could present a lucrative long-term value opportunity right now. That’s why I think investors may want to take a closer look.
