Not every cheap stock gets cheap for a good reason. Sometimes the market overshoots. And B&M European Value Retail (LSE:BME) is a potential case in point.
After collapsing more than 60% over the last five years, the shares now trade at a price-to-earnings ratio of just 12, offering a juicy dividend yield of 4.9%. But something’s started to shift.
Up 19.5% since the start of 2026, B&M’s quietly beating the market this year. So what’s behind that momentum? And is now the time to get involved?
Back to B&M basics: the plan working behind the scenes
When Tjeerd Jegen took over as CEO in June 2025, he inherited a business in need of a serious reset. Prices had drifted. On-shelf availability in key grocery brands had fallen to an unacceptable 86%. And promotions had lost their edge.
His response was the ‘Back to B&M Basics’ plan – a systematic effort to rebuild the value fundamentals of the business from the ground up. And based on the latest results, it looks like the plan’s working.
In B&M’s 2026 fiscal year (ending in March), on-shelf availability in key brands has recovered to 93%. The all-important Christmas sales delivered 3% like-for-like sales growth. And the firm’s largest ever clearance event during its fourth quarter cleanly removed excess slow-moving inventory.
This heavy discounting meant that underlying pre-tax profits still tumbled by 37.7% to £284m. However, crucially, free cash flow was actually higher, landing at £321m, enabling net debt to fall 15.9% to £656m.
These moves bring leverage back in line with management’s target range. And Jegen was direct about what comes next:
We are confident these actions can restore sustainable like-for-like sales growth at B&M UK while we embark on a multi-year plan of innovation, reinvestment and growth.
Across the Channel, B&M France is flourishing. Revenue grew 13.4%, and market share rose from 8.1% to 8.4% of the French discount market. And with 150 stores against the UK’s 799, the French expansion runway is substantial and almost entirely untouched.
Overall, it seems the recovery’s now well underway. So is now the time to jump in?
Where is the risk?
Despite the solid progress, it’s important to realise that B&M isn’t out of the woods just yet.
B&M UK like-for-like sales were still slightly negative, at -0.1%, while gross margins were deliberately sacrificed to rebuild price competitiveness and clear out old stock. And with its 2027 fiscal year expected to involve another round of strategic price cuts and higher investment spending, earnings aren’t likely to bounce back quickly.
The Heron Foods division is also still struggling. Revenue dipped 0.3% and adjusted pre-tax profits fell 73.8% to just £4m. Then throw in rising freight, energy and fuel costs and the result is a business still under significant pressure.
Is this cheap stock worth a second look?
The building blocks of a recovery are clearly in place. B&M has:
- A new CEO with a clear plan.
- A deleveraged balance sheet.
- A booming French business.
- And a UK operation that’s already begun turning the corner at store level.
With that in mind, I think it’s prudent for investors to keep a close eye on this business. The stock’s still cheap for a reason. But if B&M continues to make recovery progress and the market fails to notice, then it could be a phenomenal opportunity for long-term investors.
Should you invest £5,000 in B&M European Value right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
