B&M shares lifted by Canaccord upgrade

B&M European Value Retail’s shares received a boost on Wednesday after Canaccord Genuity raised its rating on the stock to ‘buy’ from ‘hold’ and lifted the target price to 295p from 265p.

Canaccord said it remains positive on the variety retailer’s UK prospects and is “sanguine” on concerns about the retail market following Brexit’s impact on the sterling.

The broker believes B&M is well-equipped to negate market worries.

“Its growing international buying scale should mitigate the impact of weaker sterling on input prices and gross margins,” Canaccord said.

“With all retailers exposed to foreign exchange weakness, an inflationary environment actually serves to increase B&M's price differential and so enhance its value credentials.”

B&M has grown its business internationally with the expansion of its German retailer Jawoll, purchased in 2014.

Canaccord expects Jawoll will open about 400 stores in Germany, generating more than €1.1bn in turnover and €120m in earnings before interest, tax, depreciation and amortisation (EBITDA) at maturity based on an average sales performance and EBITDA margin.

Canaccord also sees B&M continuing to grow market share in the Value sector in the UK on the back of plans to open about 50 stores per year. The broker pointed to Verdict forecasts for growth in spending at discounters and budget retailers of 35% to £25.6bn between 2015 and 2020.

Shares increased 1.53% to 264.90p at 1028 GMT.