Can This Discount Retailer Continue to Climb After Rallying 35%?

Discounters have been the biggest winners during the cost-of-living crisis in which high inflation has caused several consumers to search for cheaper retailers. Discount players such as B&M, Lidl, and Aldi have all been able to capture share across the market as value becomes the key focus.

The efforts of discounters to capture shoppers from the larger players have been relatively successful, and it is likely these players will be able to perform strongly as the stigma surrounding these retailers becomes less apparent. However, looking at discounter B&M, can the general merchandise retailer maintain its performance over the long term?

B&M Bargains (BME)

B&M shares have already rallied over 35% this year, but its tremendous gains may not be over just yet. All B&M fascias have performed exceptionally well as consumers continue to value a bargain during the cost-of-living crisis. Additionally, its push into the grocery market has only continued to drive footfall for the discounter and potentially divert sales toward its other products.

The group is well positioned to claim further share across the market and expand its business, especially as the demise of Wilko offers new opportunities, with B&M having already bought 51 Wilko stores.

Opening in previous Wilko stores offers something different for B&M, with Wilko stores predominantly operating in city centres. Therefore, B&M may be able to capture a newer audience outside of its traditional retail parks, especially as it continues to build towards its long-term target of 950 UK stores.

The risk the business now faces is consumers trading back up to more premium players as finances improve. But B&M’s wide product range, strong quality, and value-for-money credentials suggest the retailer will not have too difficult a time in persuading customers to stay.

The challenges for discounters

But discounters now face a pivotal stage in their growth as inflation slows and consumers’ finances begin to improve. The likes of Aldi and Lidl have all aggressively expanded their store portfolio over the last few years as they look to claim further share across the grocery market.

Former Lidl boss  Ronny Gottschlich believes that Aldi and Lidl’s combined market share will overtake Tesco’s by 2027. However, holding onto these new consumers will be more challenging as consumers look to trade up as their finances improve. Additionally, recent price cuts from Sainsbury’s, Tesco, Asda, and several others will only make discounter attempts more challenging.

With rising costs also impacting profits for these retailers, it is important discounters offer additional benefits alongside their key selling point to continue to claim market share in such a competitive market.

By James Fyeman