Extract from Portfolio Manager Commentaries – Sept 2022

B&M Value Retail is a UK-focused discount retailer with a nascent but growing business in France. It focuses both on groceries and general merchandise and has a very impressive 18-year track record of gaining market share and improving profitability, with a key competitive advantage being their narrow buying focus which drives volumes and scale benefits, allowing them to price at a 10%-15% discount versus the four big grocers. More than half of their sales are food and everyday consumable goods, with the balance being general merchandise with a specific focus on home and toys. The share has come under pressure due to UK inflationary and macro concerns, but being a discount retailer, they should have a relative advantage and benefit from downtrading in this tough environment. The business currently trades on a 13% forward FCF yield, and over a 6% dividend yield, which we think is very attractive, notwithstanding the macro headwinds.

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