With the latest lockdown continuing across England and elsewhere, I expect a lot of businesses will suffer. Obviously the lockdowns this year have placed substantial pressure on many companies. But even during the lockdown, some are prospering. That is why I have been scouring the market for a lockdown share I’d buy.
Lockdown has been dreadful for many UK shares
From pubs to cinemas, operators have struggled as customers stay at home and revenues plummet. Many retailers have seen sales slump – but not all. During the last lockdown, one retailer caught my eye with its strong performance. I would buy it as a share that could weather the current lockdown in good shape.
Although many retailers have faced reduced demand during lockdowns, others have seen increased revenues and profits. Shops that have been able to stay open when many others are forced to close have often attracted more customers.
Added to that, the lockdowns have affected the types of products that shoppers are buying. For some retailers, the last lockdown didn’t damage business, it actually helped it. One such lockdown share I’d consider buying is B&M European Value (LSE: BME).
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B&M was doing well even before lockdown
The company’s main B&M brand has been a retail success story for many years already. Even before lockdown, revenue and headline profits had been growing in a challenging retail environment. Its strong buying skills, wide range of brands, and competitive pricing helped the company carve out a strong position in the UK retail landscape.
But lockdown opened up a new chapter in the B&M story. Its UK stores were able to stay open. With its homeware and garden offering, it benefitted from a rush of people eager to improve their home environments. In the first half, the company’s revenues grew by over a quarter. The main B&M brand stores in the UK did even better, increasing revenue by 29%. That makes me think it is a lockdown share I would buy.
Supermarkets such as Tesco and Morrison’s also reported higher revenues. But extra pandemic-related costs meant that their profits didn’t see a similar bounce. B&M more than doubled its profits: group adjusted profits before tax increased by 128% in the first half.
Why B&M is still a lockdown share I’d buy
The group’s incredible performance in the spring lockdown was not by accident, in my opinion. B&M is a well-managed retail operator. Shoppers clearly like its offering and prices. Plus, with its mixture of food, homewares, and gardening materials, it is well suited to lockdown shopper needs.
I like companies that pass the rewards of their performance onto shareholders with increased dividends. B&M’s knockout first half led to the interim dividend being raised by 59%. On top of that, it declared a special dividend of 25p per share.
Its shares actually fell after the barnstorming results. But I expect its business to continue to perform well. I expect it to do well during this lockdown – and I think its long-term potential has been proven clearly. That is why I’d buy B&M as a lockdown share.
The post One lockdown share I’d buy appeared first on The Motley Fool UK.
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christopherruane has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value and Tesco. 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.
Motley Fool UK 2020