Berenberg slashes B&M target price but remains upbeat

(Sharecast News) - Berenberg has slashed its target price for B&M by almost a quarter after a profit warning from the discount retailer this week, but kept a 'buy' rating on the stock on the back of its "deep value". On Tuesday, the company guided to first-half adjusted EBITDA of £198m for the 26 weeks to 27 September, down from £274m the year before, and a full-year result of £510m-560m, down from £620m previously.

Chief executive Tjeerd Jegen, who joined in June, said the company's operational execution has been "weak" and announced the launch of a 'Back to B&M Basics' plan focused on returning the UK business - which accounts for the bulk of group revenues - to sustainable like-for-like growth.

"B&M's H1 2026 update on 7 October delivered the cut to guidance under the new CEO that many had feared. That said, we think the news was largely already reflected in the group's low valuation (FY1 PER 8.5x), and the rebasing of expectations has the potential to serve as a 'clearing event'," Berenberg said in a note on Friday.

The broker said the company's "strong foothold" in the UK discount retail sector provides a firm foundation for the 'Back to B&M Basics' plan, which includes price cuts on key value items, resetting its 'Managers Specials' promotions strategy, refocusing product ranges.

"It will take time for the benefits to flow, and execution is key, yet we are encouraged by the decisiveness of the actions already taken. The deep value offered by the shares (including a c9% FCF yield) gives little credit for any profit recovery, in our view, and the c9% total dividend yield pays investors well for waiting."

Berenberg reduced its target price from 590p to 450p, which still represents major upside from Friday afternoon's 232.7p level, up 0.9% on the day.