B&M European Value Retail (LSE: BME) is the worst FTSE 100 share price performer so far this year. A 38% year-to-date plunge edges out Croda International, just a shade behind at 37%.

But what is it, and why do I think it could be dirt cheap right now?

It’s the operator of the B&M chains in the UK and France, with UK operations making up most of the firm’s revenue. And it owns Britain’s Heron chain too.

Why is it down?

Interim results on 14 November gave the shares a small boost. But it was short-lived, and they quickly headed down again.

That’s despite UK revenues growing by 3.7%, with adjusted EBITDA up 11.5%.

The problem is that like-for-like sales keep on falling. This second quarter of this year saw a modest decline of 1.9%, but that follows on from a bigger Q1 slump of 5.1%.

Can the company turn that around? Analysts think it can, and they have two years of solid growth on the cards once the current year is out. We might have a shaky time before then though, including a competitive festive season.

Will it go up?

With the shares down, what makes me think they could be set for a strong few years?

Those forecasts for one thing, which would drop the price-to-earnings (P/E) ratio down as low as eight for the 2026-27 year if they’re right.

They also see a 42% dividend hike by then from the 2023-24 payout. There’s a 3.7% dividend yield on the cards for this year. And the rise could take it up to 5%. I reckon that could make it a steal if the P/E stays low.

And then there’s the company’s outlook at H1 time: “We anticipate full-year Group adjusted EBITDA to be in the range of £620m-£660m (FY24 52/53 weeks: £616m/£629m).“

That might just mark the start of a recovery.

Why it might not

The company — like the rest of the retail sector — describes the three months covering Christmas as the ‘Golden Quarter’ (and yes, it capitalises it).

While the cost-of-living pinch is so sharp, there’s a great attraction for B&M’s low-price sales outlets. And though we might expect very tight margins, the first half saw an adjusted EBITDA margin of a healthy 10.4%.

But as inflation overall falls (despite the upward move announced on 20 November) and the pressure on our pockets lessens, I fear that might mean the start of a shift back to more upmarket outlets. Maybe Marks and Spencer could be a better long-term pick to consider?

B&M reported a net debt to adjusted EBIDTA ratio of 1.2x, which doesn’t seem too stretching. But including leases, it rises to 2.5x. Debt can put pressure on long-term dividends cash.

Store growth

B&M increased its store count by 39 in the first half, with 34 of those in the UK. And that should help benefit from the “recent volume momentum” that CEO Alex Russo spoke of at halftime.

Despite the short-term risks, especially from competition at the cut-price end of the market, I’m considering buying B&M shares.

But I think I’ll wait and see how the Golden Quarter goes first.