Investors seeking a resilient, dividend-paying growth company at the forefront of the consumer trend towards trading down should buy B&M European Value Retail (BME). The variety goods value retailer is benefiting from the cost-of-living crisis.

2024 should see the cash-generative discounter continue to capture market share in the UK, where inflation and rising rates have cut consumer purchasing power, as well as in France where sales growth is running at double digits.

Progressive ordinary dividends and the potential for further special payouts mean B&M is a terrific total return stock to own in an uncertain year ahead.

The budget groceries-to-general merchandise seller retails a range of goods at cheap prices spanning branded groceries and drinks to toiletries, homewares, garden furniture and even toys. Through its core B&M UK fascia, the £6.1 billion cap is gaining market share from a ‘cookie-cutter’ store roll-out and a disruptive, relentless focus on low prices.

The FTSE 100-listed company also owns the expanding convenience store chain Heron Foods and has an exciting overseas growth opportunity via B&M France, where it is strengthening the fast moving consumer goods offer whilst raising store standards.

As Liberum highlights, B&M is ‘a rare case of a retailer that has held onto its Covid gains’ and this has led to ‘a material uplift in sales, and structurally higher margins, profitability and cash generation’. In addition, the retailer’s market shares in the UK and France remain small, meaning there could be many more years of growth ahead.

Following strong first half results in November, B&M upped its year-to-March 2024 adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) guidance to the £620 million to £630 million range, comfortably ahead of the £573 million generated in full year 2023, and B&M highlighted improving sales momentum ahead of Christmas, suggesting scope for good news when the company delivers its third quarter update (9 January).

B&M, which has agreed to acquire as many as 51 ex-Wilko stores from the administrator, also raised its long-term UK B&M store estate target to ‘not less than’ 1,200 outlets, a significant upgrade on previous guidance of 950 and a strong show of confidence from CEO Alex Russo.

Along with continued like-for-like growth, Russo reckons his charge has ‘the runway to at least double our size in the UK in the medium term, while France also offers sizeable long-term potential’. We think investors will profit by backing these growth ambitions.

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