Canaccord Genuity slashes B&M target after second profit warning

(Sharecast News) - Analysts at Canaccord Genuity slashed their target price on budget retailer B&M European Value Retail from 395p to 245p on Wednesday following the second downgrade to profit guidance in just two weeks. B&M's second guidance revision comes after an internal system error failed to recognise overseas freight costs in its income statement, and whilst Canaccord Genuity continues to believe in the strength of the firm's underlying customer proposition and opportunities for further growth both in the UK and Europe, it also acknowledged that this latest setback was "a further blow to credibility".

The Canadian bank said the latest revised guidance implied a 16-24% year-on-year reduction from the £620m achieved in FY25, and a roughly 7% reduction compared to the previous guidance based on the mid-point of the range. As a result, Canaccord Genuity reduced its FY26 adjusted underlying earnings forecasts by 8% to £475m, representing an approximately 23% year-on-year decline, with its revised forecast prudently remaining towards the lower end of the range.

"Clearly this latest profit guidance reduction is disappointing, more so given it relates to an internal system error. On our revised forecasts, B&M trades on an FY26E PER of 8.1x. Whilst we continue to believe this offers good value both in the context of the long-term average FY1 PER multiple of c.15x, but also given the significant long-term expansion potential both in the UK and Europe, we acknowledge that it will take time for market credibility to be restored," said Canaccord.

"We hope that further detail on the Back to B&M Basics turnaround plan at the interims in November will be the start of this process. Our target price reduces to 245p from 395p based on a CY26E target PER of c.10x (a c.5% sector discount & c.33% discount to the LTM avg.)."

Reporting by Iain Gilbert at Sharecast.com