B&M shares: what the analysts say

A B&M logo outside a shopping centre in Dundee, Scotland. Credit: Tosh Lubek

Cut-price B&M European Value Retail SA (LSE:BME) shares today edged higher after the chain received cautious City support in the wake of a second profit warning in as many weeks.

B&M’s failure to recognise £7 million of freight costs following a system upgrade has cost the finance chief his job and left it facing a much longer road back to target profitability.

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The £40 million downgrade to full-year guidance dealt an immediate blow to the Back to Basics plan of new boss Tjeerd Jegen, who told investors alongside the earlier 7 October warning that B&M's value proposition remained strong but that operational execution had been weak.

The former FTSE 100 company, which listed in 2014 at a price of 270p, sank to its lowest-ever level near 160p on Monday before a modest recovery to 175p at lunchtime today.

A stock with a current dividend yield of 9% drew strong interest among retail investors as B&M ranked as the most-traded on the interactive investor platform in dealings this morning.

Analysts at Barclays and Deutsche Bank retained their Buy positions following the latest downgrade, albeit with much lower price targets of 300p and 250p respectively.

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The latter said a valuation of seven times forecast 2026 earnings highlighted the potential for “upside when the dust settles”.

However, it added: “Less than two weeks after releasing a new Back to Basics strategy there is a risk that the financial building blocks did not have the prerequisite foundations.”

The next test for the company comes on 13 November, when Jegen is due to present details of the company’s turnaround plan and recent sales progress alongside half-year results.

He has previously said the company is “moving with pace” to refocus its ranges, improve on-shelf availability and “bring back excitement” to the stores.

A regular buyer of B&M shares since taking the helm, Jegen added: “We have more work to do, but we are confident these changes will restore consistent like-for-like sales growth over time.”

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Peel Hunt cut its target price from 250p to 200p this morning but maintained its Add rating, believing that the current price gives no credit at all for the prospect of a trading recovery. It sees flat like-for-like sales in the second half of this year, before a 1% rise in 2026-27. 

The broker said this morning: “We still class yesterday’s freight issue as unfortunate, whereas the ineffective strategy that caused the earlier warning was careless.

“A new broom should sweep in new confidence, and while our forecasts suggest it will be a while before the new strategy brings strong like-for-like growth, the early soundings are good.”

Shore Capital previously viewed the company’s valuation as attractive, particularly noting the high cash generation of the business through a free cash flow yield of about 11%.

However, its Buy recommendation is under review following yesterday’s update.

The broker warns the business is running at a lower gross margin than previously thought, suggesting a tougher route back to the double-digit earnings margin the company is targeting. 

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Shore added: “This update will shake investor confidence in management and show that the business lacks a clear handle on its cost figures and so we are once again more cautious than optimistic on the stock until we can better understand the outlook.”

Graeme Evans owns B&M shares