LONDON (ShareCast) - (ShareCast News) - B&M European Value Retail should "significantly outperform" UK non-food retail sales in its next two years, reckoned Goldman Sachs, which upgraded the discounter's shares to a 'buy' recommendation from 'neutral'.
Goldman, which upped its price target to 400p from 380p, bumped its rating on the shares after their slight de-rating from May's all-time high above 370p to recent levels near 340p.

Earlier this week the FTSE 250 discount retailer announced its first-quarter like-for-like sales growth in the UK of 7.3% and confirmed its store opening guidance in the UK of 40-50 stores for the full year and 15 for Germany's Jawoll chain.

The bank forecasts B&M will grow UK LFL sales 4.5% in its 2018 fiscal year and 3% in 2019, coupled with strong expansion of store space with around 45 new stores openings in both years, with Germany on top.

What's more, it sees operating margin expanding roughly 20 basis points this financial year as it benefits from stable gross margin in the UK and some operating expenditure leverage.

"B&M has strong free cash flow generation, which we believe could be used for M&A, and/or a special dividend in FY18," analyst Tushar Jain wrote.

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