Interactive Investor

B&M European Retail: getting harder for this pandemic winner

Profit has soared in this Covid year, but this retailer now faces tough comparatives. Buy, sell or hold?

3rd June 2021 09:32

Keith Bowman from interactive investor

Profit has soared in this Covid year, but this retailer now faces tough comparatives. Buy, sell or hold?

Full-year results to 27 March

  • Total revenue up 26% to £4.8 billion
  • Adjusted profit up 83% to £626.4 million
  • Year-end net debt of £520 million
  • Final dividend payment up 141% to 13p per share

B&M's (LSE:BME) status as an essential retailer has proved critical in underpinning these progressive results during this pandemic year.

The sale of food has kept its UK stores open, which when added to its value offering and Out of Town store locations, has given it strong consumer appeal. 

Revenues for its core UK business are up by nearly 30%, with same store sales up by almost 24%. Helped by a lack of markdown activity under Covid sales and increased sales densities, the adjusted profit margin jumped to 13% from a previous 9%, pushing adjusted profit up by 83% to £626.4 million – ahead of management’s prior forecast range. 

Despite more Covid restrictions than in the UK, the group’s smaller French business also made progress, reporting an adjust profit of £11 million compared to the previous year’s £3 million loss. 

More broadly and given the strong trading performance, the final dividend payment has been increased by 141% to 13p per share, resulting in a doubling of the total normal dividend year-over-year and adding to the previously announced special dividend. 

In all, the clear boost from pandemic sales is far from guaranteed to continue over the months ahead, with tough comparatives now being faced. Guidance for the year ahead offers caution, pointing to lower like-for-like UK sales and some reversion in the elevated profit margin. On the upside, shareholder returns have continued to positively surprise, while the company’s long-term expansion plans remain in place. In all, and with the company’s value offering likely to remain attractive in tough economic times, analyst consensus opinion currently points to a tentative buy. 

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