Citi reiterates 'buy' on B&M, says de-rating overdone

(Sharecast News) - Citi reiterated its 'buy' rating on B&M European Value Retail on Friday as it said the stock's de-rating was overdone. The bank noted that B&M has a 35% revenue and an over 50% profit share of the UK Variety Discount Retail market, which has seen easing competitive pressures recently.

"Whilst investor sentiment is understandably weak given -7% earnings revisions year-to-date, we view the de-rating as overdone and not commensurate with the earnings growth potential of a business that has structurally higher sales densities and quicker store paybacks post pandemic," it said.

"In the context of potential supermarket price wars, we believe B&M's General Merchandise proposition may provide some margin protection, helping to stabilise earnings and so over time driving a re-rating."

Citi added that its lowered price target of 456p represents 13x FY26 estimated price-to-earnings.

At 0940 GMT, the shares were up 1% at 263.60p.