Deutsche Bank upgrades B&M to 'hold', lowers target price

Analysts at Deutsche Bank lowered their target price on retailer B&M from 480.0p to 395.0p on Wednesday but upgraded the stock to 'hold', stating the group was "always discount" but also "increasingly value".

Deutsche Bank said it had always taken "a cautious view" on B&M over the last 12 months, given the potential for "a reversal of sales uplift" seen during lockdowns as competitors reopened, category mix shifted away, the risk of "greater weakness" for the lower income demographic and the "threat of gross margin normalisation" on markdown and mix.

However, what Deutsche Bank said it didn't see was the group's previous chief executive officer selling more shares and then leaving, the weakness of GBP, and rampant inflation putting further pressure on sales and margins.

"Whilst B&M has been disciplined in its margin management over the years and it may benefit from some trading down," said DB,

"The valuation implies to us at 10.5x cal 2023 on our circa-15% below consensus numbers that we are largely at the low point but we retain our Hold recommendation given too much uncertainty."

Reporting by Iain Gilbert at Sharecast.com