The FTSE 250 harbours many hidden gems, and one which caught my consideration not too long ago is BME European Retail (LSE: BME).

It’s finest recognized for its expansive community of low cost shops, providing prospects low-cost family items, clothes, and different necessities. Working throughout a number of European markets, it advantages from shoppers’ growing choice for budget-friendly buying amid ongoing financial uncertainty.

Sadly, the corporate has been all around the information currently for all of the flawed causes. 

A string of points

The share price has tanked 51% previously 12 months and is now at a five-year low, prompting the departure of short-lived CEO Alex Russo.

Final December, the corporate dropped out of the FTSE 100 after its market cap sank beneath £3bn. Then, in January this 12 months, it revealed disappointing festive season gross sales earlier than issuing a revenue warning in February.

Each Canaccord Genuity and JPMorgan Chase have lowered their price targets for the inventory this 12 months.

Lengthy story brief, issues haven’t been going nice.

Restoration potential?

Because the saying goes: when there’s blood within the streets, purchase. With the price now at a five-year low and institutional buyers threatening to intervene, there could possibly be an excellent alternative right here.

A brand new CEO is prone to shake issues up and investor intervention may get the cogs turning. If that’s the case, 2025 could possibly be a 12 months of sturdy restoration.

Regardless of all the issues, BME has instituted an aggressive enlargement technique concentrating on the UK, Spain, and France. It consists of the development of fifty new shops with a view to boosting income and model visibility.

It’s additionally been engaged on its on-line presence, bolstering e-commerce platforms to enhance brick-and-mortar shops. With on-line buying taking off since Covid, it is a essential issue for long-term development.

What’s extra, the falling share price isn’t indicative of dangerous monetary efficiency. In its newest annual outcomes, income climbed 10% to £5.48bn and earnings grew by 5.5% to £367m. Whereas revenue margins slipped barely on account of increased bills, earnings per share (EPS) rose from 37p to 35p.

Now with a trailing price-to-earnings (P/E) ratio of 8.2, the inventory appears to be like considerably undervalued. Add to {that a} meaty 5.6% dividend yield and it has some engaging prospects for each worth and earnings buyers.

Dangers to contemplate

The important thing threat, after all, is that it doesn’t get better. Whereas low cost retailers are inclined to fare properly throughout financial downturns, a extreme recession may nonetheless influence shopper spending. As we’ve already seen in 2022, inflationary pressures throughout such durations may cause logistical disruptions, impacting prices and margins. 

It additionally operates in a extremely aggressive business, with rivals reminiscent of Lidl and Aldi combating for market share. If a brand new CEO isn’t discovered rapidly, operational effectivity could slip, giving rivals the benefit.

A promising worth inventory

With sturdy financials, a rising presence in Europe and beneficial business traits, BME European Retail could possibly be probably the greatest FTSE 250 shares to look at in 2025. 

Whereas dangers exist, the corporate’s strategic enlargement and stable efficiency present promise. I’m optimistic {that a} new CEO and investor motion can flip issues round for the retailer. 

As such, I believe buyers in search of development within the low cost retail house ought to think about BME a pretty possibility.