B&M European Value Retail (LSE:BME)

Intro

B&M started life in 1978 as a single discount store. The business pottered along as a small regional operation until 2004, when brothers Simon and Bobby Arora acquired it. At the time, B&M had just 21 stores. Under the Aroras, it became one of the great British retail growth stories, listing on the London Stock Exchange in 2014 and briefly reaching the FTSE 100.

Today the group operates around 780 B&M stores in the UK, over 130 in France, and roughly 340 Heron Foods convenience outlets. The Arora family has gradually reduced its stake, making B&M a widely held institutional stock. A domicile migration from Luxembourg to Jersey – completed in early 2026 – has simplified the corporate structure and, crucially, given the board greater flexibility to return capital via share buybacks.

Valuation

The share price has roughly halved over the past year, falling from above GBP3.5 to around GBP1.6. At that level, the market capitalisation sits near £1.6 billion.

On FY25 adjusted diluted earnings of 33.5p per share, the stock trades at under 5x earnings. Even adjusting for a weaker FY26 – where EBITDA guidance has been cut twice, now standing at £440–475 million – the valuation is hard to ignore. EV/EBITDA on trailing numbers sits around 5x, and the dividend yield is above 7%.

The earnings decline is real but largely deliberate: management has been investing heavily, clearing inventory through SKU rationalisation, and absorbing cost inflation from national living wage increases. H1 FY26 adjusted EBITDA fell 30% to £191 million. That's ugly. But revenue still grew 4% – the top line is not broken.

What's next?

New CEO Tjeerd Jegen, a former Tesco executive who joined in mid-2025, has launched a "Back to B&M Basics" strategy focused on sharpening the value proposition and improving operational execution. The long-term UK store target of 1,200 B&M locations – up roughly 50% from today's base – provides a substantial organic growth runway, with new store payback periods reported at under a year. France, now past 130 stores, continues to grow earnings steadily.

The near-term headwinds are genuine. Heron Foods has significantly underperformed, the CFO departed in late 2025 following an accounting error, and operating leverage is working in reverse while margins reset. These are the kinds of headlines that keep most investors away.

But B&M has navigated difficult environments before – from the financial crisis through Brexit, COVID, and the cost-of-living squeeze – and has consistently come out the other side with a larger, more profitable store estate. The board has formally approved share buybacks as its preferred method for returning excess capital, and at these depressed valuations, buybacks could prove highly accretive. Management still targets a return to low-double-digit adjusted EBITDA margins once sustainable like-for-like growth is re-established.

A discount retailer trading at a discount to the market, with a clear plan to get back to business as usual – that's a setup worth paying attention to.

Current price

GBP1.6 per share

Disclosure

The author is currently long BME.

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