B&M shares fall as profits slide 28% to £198m

B&M has seen its shares slide in early trading after it revealed its pre-tax profits fell 28% to £198m, down from £274m, in the six months to the end of September.

The performance comes despite seeing revenues improve 4% to £2.7bn, primarily driven by B&M UK volume growth and ASP increases, good trading momentum in B&M France and new store openings.

B&M UK revenues also improved 3.5% to £2.19bn in the first half and made up over 80% of total group revenue.

However, B&M UK LFL sales in H1 improved just 0.1%, with positive volume and value LFLs in general merchandise offset by a decline in FMCG LFL sales. The budget retailer said the timing of Easter and the early onset of good weather pulled forward demand for its general merchandise outdoor ranges in early H1, driving double-digit LFL sales in April. 

Sales were also weak in May as this trend reversed, following which it saw a progressive moderation in LFL sales declines in June and each period during Q2. Despite this improving trajectory, the B&M UK LFL sales declined was weaker than the group’s expectations.

Following the diagnosis of factors impacting its recent operational performance, the retailer said it has taken actions to improve execution and drive LFL sales growth in B&M UK. These include:

• Adjusting prices on FMCG Key Value Items (‘KVIs’) to sharpen its customer value proposition. It has cut prices on 35% of our KVIs, lowering the average KVI line price by 1.8%.

• Rebooting its ‘Managers Specials’ promotions, which it said have become “too static and duplicative”.

• Refocusing its ranges to reduce line count and accelerate the clearance of discontinued ranges, particularly in FMCG, home accessories and toys ranges, following a material increase in SKUs in recent years that has introduced complexity for customers and operations.

• Restoring product on-shelf availability, which is below industry FMCG benchmarks, resulting in an estimated 86% FMCG best seller availability across key stores versus best practice standards of 98%. 

Tjeerd Jegen, CEO, said: “Since becoming CEO in June, I have led the business through a comprehensive review of our customer proposition and operations. We have concluded that while B&M’s value proposition remains strong, our operational execution has been weak. This has impacted our first-half trading performance, and this is reflected in the full-year outlook that we publish today.

“Our response is a decisive plan, ‘Back to B&M Basics’, focused on returning the UK business to sustainable like-for-like growth. This is our absolute priority. We have already sharpened our price position, and we are moving with pace to refocus our ranges, improve on-shelf availability and bring back excitement to our stores. We have more work to do, but we are confident these changes will restore consistent like-for-like sales growth over time.”