On Friday, Deutsche Bank (ETR:DBKGn) adjusted its price target for B&M European Value Retail SA (LON:BMEB) (BME:LN) (OTC: BMRRY) shares, reducing it to £6.30 from the previous £6.60. Despite the change, the firm maintained its Buy rating on the stock.
The revision reflects a cautious stance on the company's near-term trading outlook, particularly for the first quarter, where a weaker like-for-like (LFL) sales growth is anticipated.
The analyst from Deutsche Bank acknowledged the ongoing strength and competitive positioning of B&M, citing improvements in product offerings, high in-store standards, and effective cost control.
The analyst noted that the investment focus for B&M is shifting towards contributions from new store spaces rather than LFL sales growth. This shift is significant as investors are currently sensitive to LFL figures, especially when they are negative, and tend to project these figures far into the future.
The bank's revised outlook includes lowered earnings per share (EPS) forecasts for B&M, with a 4% reduction for the fiscal year 2025 and a 6% decrease for 2026. These adjustments are due to the expected weaker first-quarter trading performance, which may lead to margin pressures. Despite these factors, Deutsche Bank continues to see value in the stock, as reflected in the ongoing Buy recommendation.
The price target adjustment comes amid a challenging comparative period, where the company faces high expectations from previous performance. The analyst's comments suggest that while there is a temporary downturn expected in the first quarter, the long-term prospects for B&M remain positive.
Investors and market watchers will likely monitor B&M's upcoming trading updates to gauge the accuracy of these projections and the company's ability to manage the anticipated margin pressures while continuing to expand its retail footprint.
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