ii view: B&M downgrades profit outlook despite better December

Third-quarter trading update to 27 December

• UK like for like (LFL) sales down 0.6%
• UK Heron Foods LFL sales down 0.1%
• French LFL sales up 0.4%

Guidance:

• Now expects full-year adjusted profit (EBITDA) of between £440 million and £475 million, down from a previous £470-520 million

Chief executive Tjeerd Jegen said:

"We entered our Golden Quarter sharper on price to reinforce our value proposition with our customers. 

“The reset we are driving through Back to B&M Basics is necessary to rebuild the long-term value of the business and these workstreams continue to progress at pace.“

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ii round-up:

B&M European Value Retail SA (LSE:BME) today lowered full-year profit hopes as the UK and French discount store operator continued to invest in product prices as part of its ‘back-to-basics’ performance improvement plan. 

Third quarter like for like (LFL) or same store sales for the group’s core UK outlets fell 0.6%, although there was a 3% gain in December and positive trends into January, as new management initiatives including sharper pricing kicked in. 

Investment in pricing and a subpar performance from the group’s UK Heron Food outlets now see forecasts for annual adjusted profit (EBITDA) reduced to a range of between £440 million and £470 million compared with a previous £470-520 million.

Shares in the FTSE 250 company initially fell 2%, then recovered before drifting lower again. B&M shares more than halved last year. Fellow price focused retailer Card Factory (LSE:CARD) dropped by close to a third in 2025, while the FTSE 250 index improved by 9%.

As of late December, B&M operated 791 variety stores across the UK, along with 343 Heron Food and B&M express stores, and 146 B&M branded outlets in France.

Management focus under the 12-18 month ‘Back to B&M Basics’ plan includes adjusting the mix of products sold and restoring supplier product availability. 

Same store sales for Heron Foods declined 0.1%, with sales on the same basis for the French outlets rising 0.4%. 

A third-quarter UK profit margin below last year’s levels given ongoing investment in pricing is expected to continue into the fourth quarter. This will assist a clearance of discontinued product lines and a more compelling line up come the start of the new financial year in April.  

Full-year results to late March are likely to be announced early to mid-June.  

ii view:

Started in 1978 with its first store opening in Blackpool, B&M came to the UK Stock Exchange in June 2014. Today, the seller of Fast-Moving Consumer Goods (FMCG) such as toiletries, confectionary and cosmetics, competes against rivals such as Aldi, Lidl and even home focused retailers such as B&Q owner Kingfisher (LSE:KGF) and furnishings group Dunelm Group (LSE:DNLM). Geographically, the UK accounted for 90% of sales over its last financial year, with France the other 10%. 

For investors, required investment in product pricing and changes to improve operational performance now see current full-year profit forecasts lowered. Intense competition including online rivals such as Amazon.com Inc (NASDAQ:AMZN) and Temu from China cannot be ignored. As with all retailers, the weather can influence demand, while higher UK business costs such as employee taxes now weigh on future profits. 

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On the upside, a performance improvement plan from the relatively new CEO and former Tesco executive continues. A diversity of product and geographical location exists with potential to increase French store numbers. A move in its corporate domicile is expected to increase flexibility towards shareholder returns, while a forecast price/earnings (PE) ratio at around half that of the 10-year average appears to suggest improved value.  

In all, scope for caution persists, with profit estimates still under pressure. That said, a turnaround plan and forward dividend yield above 5% are likely to keep speculative investors interested. 

Positives: 

• Diversified product range
• Previous payment of special dividends

Negatives:

• Uncertain economic outlook  
• Exposure to currency movements 

The average rating of stock market analysts:

Buy