B&M European Value Retail has experienced remarkable growth since opening its first discount store in Blackpool in the 1970s, transforming into a FTSE 100 company today. However, investor confidence in its long-term growth trajectory is wavering, with the stock losing over 25% of its value within the past year.

Founded in 1978, B&M initially struggled as a retailer with merely 21 stores until brothers Bobby and Simon Arora acquired it from Phildrew Investments for £525,000 in December 2004. Fast forward two decades, and the company boasts a market capitalization exceeding £4 billion.

B&M offers an extensive array of products ranging from long-lasting groceries and home goods to toys and DIY tools, all at highly competitive prices. Over the last ten years, the company has expanded significantly, leveraging the growing dominance of discount retailers like Aldi and Lidl. Currently, B&M operates 715 stores in the UK and 124 locations in France under the B&M brand.

Recently, however, B&M’s growth has encountered hurdles, with stock prices declining and short interest—indicating investor skepticism—approaching around 2% of its total shares.

As inflationary pressures have begun to ease, consumer spending at discount retailers has witnessed a decline. Both Aldi and Lidl have found it challenging to sustain their market growth rates, leading analysts to anticipate a slowdown for B&M as well. In the medium term, analysts predict that like-for-like sales growth for B&M stores in the UK will average around 2% over the coming years, significantly lower than the historical average of 4%. Despite B&M recording a peak adjusted cash profit of £629 million on sales of £5.5 billion for its 2024 fiscal year, the company has yet to issue formal guidance for the next financial year, creating uncertainty.

Nonetheless, like-for-like sales figures might not be the focal point for B&M’s ambitions regarding long-term growth. The company has aggressively expanded its physical presence, doubling its UK store count in the last decade and raising its mid-term target from 950 to at least 1,200 stores this year.

The rapid establishment of new stores has proven both feasible and lucrative, allowing B&M to return substantial profits to shareholders. From 2020 to 2024, the retailer distributed ordinary and special dividends totaling £1.8 billion, reflecting over 30% of its current market capitalization.

Despite the slowdown, B&M has managed to retain the benefits accrued during the pandemic. Average revenue per store is reported to be £1.2 million higher than pre-pandemic levels, according to analysis from Panmure Liberum. Overall revenue has increased by £1.7 billion compared to its 2020 fiscal year, while inventory levels have only risen by £188 million.

Weak trading results in recent months have caused concern among some investors. During the first quarter of the 2025 fiscal year, like-for-like sales in the UK saw a decline of 4%, although this was a better performance compared to some competitors—Argos recorded a 6% drop, while Poundland experienced a 7% decline in sales.

The primary risk facing B&M’s shares remains the challenging consumer environment. While the company’s emphasis on value positions it favorably, it does not insulate it from consumer spending cuts due to increased financial pressure. The stock market is presently adjusting to B&M’s normalization to a slower level of growth; however, by maintaining stringent stock management—indicating no markdown risk for the spring and summer seasons—the company may weather this difficult period in the retail sector well.

Advice: Hold

Reason: Growth is maturing, but the company’s fundamentals remain strong.

Wickes

Wickes, a home improvement retailer, faces fluctuations tied to the housing renovation market. This year’s pre-tax profits are anticipated to decline by 22% compared to the previous year. Nevertheless, there are early indications of increasing demand and a dividend yield of 6.6%, which may attract some investors’ interest.

Wickes, with a history dating back to 1854 but formally operating in the UK since the 1970s, employs a traditional DIY store approach catering to both trade customers and DIY enthusiasts. It was the first fixed-price builders’ merchant in the UK and separated from Travis Perkins through a premium listing on the London Stock Exchange in 2021.

Following a surge during the pandemic, the home improvement sector has experienced a downturn over the past two years due to rising mortgage rates, affecting renovation demand. However, recent reports suggest Wickes might be emerging from this decline, with retail like-for-like sales increasing by 0.6% in the first half of the year. While its design and installation showroom sales have dropped by 17%, there are signs that this sector might be stabilizing.

The acquisition of solar panel company Solar Fast in May could support growth as more renovation projects are driven by sustainability and energy efficiency goals.

Over the past year, Wickes’ shares have climbed by 28%, although they still trade at a relatively modest price-to-earnings ratio of 12.9, especially in comparison to Kingfisher, the owner of B&Q, which trades at a multiple of 14.9. Considering Wickes’ dividend yield, projected at 6.7% for the next year, some income-focused investors might find it appealing. Still, as the home renovation market is still in the early stages of potential recovery, with consumers hesitant to make large purchases, investors may prefer to be cautious and refrain from purchasing shares at this time.

Advice: Hold

Reason: Recovery in the sector remains in the early stages.