Berenberg hikes target price on 'well placed' B&M

Berenberg stated B&M's third quarter revenue performance was "well ahead of expectations", which it believes provides "useful evidence" that its discount business model was "well placed" to navigate the prevailing consumer backdrop.

"With struggling peers providing an opportunity for further market share gains, a well-controlled inventory position and the potential for surplus capital returns to continue over the medium term," said Berenberg, which also reiterated its 'buy' recommendation on the stock.

The German bank said challenges facing the UK retail sector were already "well publicised". However, it thinks B&M is "relatively well placed" to navigate the prevailing environment and said its "leading price position" should help it benefit from consumers choosing to trade down as a result of disposable income pressures, while the struggles of peers such as Wilkos also create the potential for additional market share gains.

"Furthermore, while various players in the broader retail sector are facing challenges from excess inventory, B&M ended Q3 with its inventory down £100.0m year-on0year, which should be supportive for margins in the coming periods," concluded Berenberg.

Reporting by Iain Gilbert at Sharecast.com