29th Jun 2023 17:07
(Alliance News) - Trading remained strong at B&M European Value Retail SA in the financial first quarter, but it wasn't enough to stop the shares falling sharply.
Russ Mould at AJ Bell suggested the share price weakness could "be the lack of full-year guidance which implies no upgrades to earnings expectations".
He also pointed out "the shares have already had a strong run this year, up more than 30%, so perhaps some investors are banking profits while the going is good".
B&M shares closed down 6.4% at 553 pence on Thursday. They have risen 30% in the year to date and 43% in the last 12 months.
Eleonora Dani at Shore Capital felt the lack of guidance was odd.
She also feels the shares look fully valued.
"We remain cautious due to the increasingly challenging year-on-year comparisons expected for the remainder of the year, a worrisome increase in shrinkage, and the potential need for price adjustments to support low-income UK consumers," she said.
Shore rates B&M at 'hold'.
Broker Peel Hunt also has a 'hold' rating on B&M.
"The shares have had a great run but we are slightly concerned about valuation," Peel analysts said.
B&M said strong, profitable momentum across all regions boosted its quarterly revenue.
The Luxembourg-based variety goods value retailer said total revenue in the first quarter of financial 2024, ended June 24, grew 14% to GBP1.32 billion from GBP1.16 billion a year prior. B&M notes this was in line with its internal expectations.
Revenue for the UK division rose by 11% to GBP1.07 billion from GBP957 million the year before. This was driven by "consistently strong and positive" like-for-like transaction numbers, B&M explained, reporting a like-for-like revenue growth of 9.2% compared to a 9.1% decline in the first quarter of financial 2023.
Dani at Shore Capital described the update as "robust".
Mould at AJ Bell thinks B&M is "the ultimate play on the cost-of-living crisis, offering a range of goods at cheap prices.
"A lot of people are feeling the pinch of the higher cost of borrowing and are looking for ways to trade down to cheaper items for the things they need in the home."
"This is not simply a pound store offering, B&M is a place for people to buy things like garden furniture, desks and kettles," he added.
He thinks the firm has replaced Argos as "the go-to place for such items."
He thinks "even when the cost-of-living crisis fades away, B&M in theory should be able to keep many of the customers it won during the tougher economic times, particularly if it continues to offer good for value for money."
"The fact the current crisis could last well into 2024 suggests that many shoppers will become so used to visiting B&M that their shopping habits become ingrained," he believes.
By Jeremy Cutler, Alliance News reporter
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