Analysts at Berenberg raised their target price on discount retailer B&M Bargains from 600.0p to 625.0p on Tuesday after having delivered full-year results ahead of expectations, driven by a surge of demand in the last few weeks of the quarter.
While Berenberg noted the company benefited from Covid-19 pandemic-related demand tailwinds, it also believes it will be a post-pandemic winner, offering one of the “strongest top-line growth” and return on invested capital profiles in European retail and a cash-generative business that “should” support additional capital returns.
The German bank also stated that B&M’s discounter business model was “well positioned” in a higher-inflation environment and thinks that the firm’s recent share price fall despite “a robust set of results” creates “an attractive entry point”.
“With rising input costs, we expect inflation to increase, and management reiterated that this would be the case. As outlined in our recent sector note on inflation (dated 20 May), we believe B&M’s discounter business model is best positioned in the event of rising inflation,” said Berenberg, which also reiterated its ‘buy’ rating on the stock.
“Furthermore, its growth, scale and strong supplier relationships provide scope to achieve strong terms in light of pricing pressures.”
