A P/E of 6.6! Why is this FTSE 250 stock so ridiculously cheap?
While the FTSE 250 has delivered some robust returns for investors in 2025, the same can’t be said for all of its constituents. And one that stands out the most is B&M European Value Retail (LSE:BME).
Despite a weaker economic environment pushing consumers into the arms of discount retailers, this enterprise has struggled to capitalise on the resulting tailwind. And when combined with other surprise developments, the stock’s collapsed almost 55% since January.
That’s obviously a painful loss. But with such a steep sell-off, B&M shares now trade for a price-to-earnings ratio of just 6.59. Could this secretly be a rare long-term buying opportunity?
What happened?
Quite a lot has happened this year to B&M, so let’s start at the beginning. In early 2025, B&M found itself struggling to maintain its sales on a like-for-like basis, in large part due to excellent execution from a key rival â Tesco.
With Tesco’s Clubcard scheme working wonders in generating perceived value, the supermarket giant has actually expanded its market share despite not actually being cheaper overall than discount retailers. By the summer, the impact on B&M became clear.
Combining stagnating growth with higher staff costs due to adjustments made to Minimum Wage and National Insurance contributions, the firm announced its first profit warning that sent the FTSE 250 stock tumbling by double digits.
Then October came knocking with the revelation that improper accounting failed to recognise £7m in overseas freight expenses. The CFO stepped down as a result of this blunder. And following its half-year results in November, the full extent of the company’s struggles became clear.
Despite some progress made on the top line, which grew 4%, underlying operating profits have collapsed by 31.5%, alongside free cash flow resulting in a similar 34% cut to dividends.
Hope for a recovery?
Needless to say, B&M’s situation is pretty dire. However, there’s room for optimism. Emerging from all this chaos is a new CEO with a new strategy called ‘Back to B&M Basics’ designed to restore like-for-like growth.
The plan is to:
- Reduce the number of product lines available to simplify the supply chain.
- Reduce prices to re-establish the perception of value among British households.
- Reboot the group’s ‘Manager Specials’ promotions to provide store managers with the flexibility to offer promotions on items most popular in their local regions.
This approach steers B&M towards a more decentralised business model, which has worked well for other companies in the past.
Overall, management expects to start delivering results within the next 12-18 months. And institutional analysts have seemingly started to become more cautiously optimistic about the FTSE 250 enterprise thanks to this strategic shift.
Bargain or trap?
‘Back to B&M Basics’ is still very much in its early stages. As such, it’s impossible to know whether it’ll be a success. However, CEO Tjeerd Jegen certainly seems confident, given he’s invested just shy of £200,000 of his own money buying B&M shares.
With a lot of execution risk still surrounding this enterprise, I’m not rushing to invest right now. But if management’s turnaround strategy starts delivering on its promises, this stock could indeed be a bargain worth considering. That’s why I’m adding it to my watchlist for now, along with several other promising turnaround opportunities I’ve spotted.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
