B&M is good, but is ‘good’ good enough?

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B&M European Value Retail SA (LSE:BME) has made a solid effort considering the strong numbers last year, but a City broker is wondering if this will be good enough for the market.


The budget retailer posted a 1% rise in group revenues to GBP2.2bn but UK like-for-likes dropped 5%.


READ: B&M disappoints as pandemic-induced sales boom slows down


Gross margin in the B&M UK business was particularly strong, driven by a change in the sales mix towards general merchandise and high sell-through across Spring/Summer seasonal ranges leading to limited markdown activity.


There were more challenging trading conditions in Heron Foods as average transaction values for grocery shopping normalise to pre-pandemic levels.


“Current trading is OK: we have learned to expect brilliance from B&M, and should not be disappointed when trading is only ‘good’, but the market does not work like that,” analysts at Peel Hunt commented.


“The numbers were highly impressive against such a tough comparative. B&M is clearly retaining a good share of the shoppers who tried the stores for the first time last year, and margins in the first half were strong. France is showing good progress as stores are rebadged.”


But, even though the broker seemed to approve, it noted that the shares imply that there won’t be many more upgrades moving forward, so “we can find much more potential for performance elsewhere in the sector”.


Shares slid 6% to 603.2p on Thursday afternoon.

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