B&M European Value Retail SA (LSE:BME) shouldn’t “ignore the margin elephant in the room,” said Deutsche Bank, which upped its target price to 415p from 395p but kept its ‘hold’ rating.
Shares fell by 5% on the discount retailer's first-half results yesterday, where management came out fighting with regards to trading, cost management and recovery in gross margin, said the bank.
However, shares fell on the back of B&M ignoring “some of the big elephants in the room” relating to 2024, including utility costs, and this also being when hedged rates on foreign exchange and freight roll off.
Despite this, the Deutsche analysts said “in the short term we think the sales and margin trajectory appear robust as we head into peak [season].”
As a result, they raised their forecasts for adjusted underlying earnings (EBITDA) by 8% to £561mln from £520mln, in line with B&M’s maintained guidance range of £550mln to £600mln.