B&M European Value Retail SA (LSE:BME) continues to split City opinion, with its first-quarter trading update sending Deutsche Bank to upgrade the discount retailer on signs that profit margins are stabilising, while Panmure Liberum abandoned its long-standing bullish stance.
The contrasting reactions underline the uncertainty surrounding new chief executive Tjeerd Jegen's efforts to revive growth after several disappointing quarters.
Deutsche's Adam Cochrane upgraded the shares to 'hold' from 'sell', arguing that first-quarter trading was likely to mark the low point for UK like-for-like sales and that Jegen's strategy looked "sensible".
The bank's forecasts for profit before tax for the 2027 financial year were raised 7% to £282 million, with the share price target price to 200p.
Cochrane said B&M's valuation, at around 10 times earnings and an 11% free cash flow yield, now offered greater support.
"Our previous negative stance," he said, "was predicated on inflation pressures on lower-income consumers, pressure on B&M margins from price investment, value perception needing to be improved, and lack of online offer making the brand less relevant to changing consumer habits.
"Whilst not all of these issues have been resolved, we see less downward pressure on the consumer, changes to de minimis import duty relief may be accelerated, and we believe that [the first quarter] will represent trough UK LFL alongside a better-than-expected gross margin."
Panmure Liberum took the opposite view, downgrading the shares to 'hold' from 'buy' in a note titled "Throwing in the towel".
Analyst Ben Hunt argued the retailer's first-quarter update contained "little evidence of recovery", with weak sales suggesting clearance activity at the end of the previous financial year had failed to revive demand.
He cut profit forecasts by more than 10%, arguing that price investment in grocery lines had yet to produce a meaningful improvement and questioning whether simplifying B&M's product range alone would solve its underlying problems.
Elsewhere, Citi trimmed its target price to 195p while maintaining a 'neutral' rating, and Jefferies said the update was "very much as expected" and did not alter its own 'hold' stance.
