BofA stays at 'buy' on BME European Value Retail, sees strong Q4

Analysts at Bank of America reiterated their 'buy' stance on shares of B&M European Value Retail arguing that the new lockdown in the UK should buoy the firm's sales.

The retailer posted a 21.1% jump in UK like-for-like sales for the 13 weeks ending on 26 December and BofA estimated that growth slowed to 17% in December.

Yet that stronger-than-expected performance for its fiscal third quarter led the company to narrow its guidance for full-year earnings before interest, taxes, depreciation and amortisation from £520-570m to £540-570m.

BofA did not thing that the upwardly revised guidance was a function of expectations for a "strong" fourth quarter.

The broker nevertheless revised up its estimates for B&M's 2021 financial year EBITDA from £532m to £554m, albeit leaving its projections for the outer years virtually unchanged.

For the fourth quarter of FY 2020, the analysts predicted double digit LFL sales growth in January and February before strong comparables for March began having an impact.

"The tough comps for FY22 could be seen as a concern, though we expect B&M to capitalise on a broader base of clients, gained during the pandemic," they added.

"We believe the company to retain new customers, build loyalty, and keep most of the sales built in 2020/21. We reiterate our Buy rating."

BofA left its 545.0p target price for the stock unchanged.