B&M European Value Retail (AO) | Buy | Q1 FY27: B&M UK miss, although trend is positive

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B&M European Value Retail (AO) | Buy | Q1 FY27: B&M UK miss, although trend is positive

B&M European Value Retail Buy | Target Price: 250p

Company description Management

B&M is a capital-light, store-led discount retailer built around a limited Tjeerd Jegen, CEO

assortment, seasonal GM rotation, and branded FMCG value, with a presence in Andrew Orchard, HIR

the UK and in France. Its B&M UK format generates most of its earnings, while Key shareholders

France tests the international potential of the concept, and Heron Foods is a Free float 80.74%

smaller discount convenience arm, which is less central strategically. The Capital Group Companies Inc. 12.47%

Fidelity Research Management 6.79%

Investment case Valuation methodology

Retail execution drift has become a central issue at B&M UK, Our 12-month target price is based on our DCF model.

against the backdrop of a choppy UK consumer market, which In our DCF model, we use a WACC of 10.3% and a LT growth rate

has resulted in subdued LFL growth and margin compression in of 1.0%.

recent periods. Our DCF model output is also cross-checked on the basis of

Management has developed a "Back to B&M Basics" plan, aimed comparable peer multiples.

at fixing retail execution by acting on price, promotion, range, Risks to our rating

and availability. Path to fixing retail execution becomes more complex than

We therefore see room for growth in B&M UK performance anticipated.

considering the self-help potential and the available Defensive UK consumer puts further pressure on financial

whitespace, long-term growth potential in B&M France (also performance.

demonstrating that the model can be exported), and optionality Competitive intensity puts further pressure on financial

with the discount convenience arm Heron Foods. performance.