Interactive Investor

ii view: B&M laps tough trading comparatives

8th July 2021 11:20

Keith Bowman from interactive investor

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This value variety retailer operates in both the UK and France. We assess prospects.

First-quarter trading update to 26 June

  • Currency adjusted total revenue up 3.1% to £1.19 billion
  • UK only like-for-like sales down 4.4%
  • French revenue up 26.9%

Chief executive Simon Arora said:

"The Group has made a strong start to the new financial year and sales remain significantly above pre-pandemic levels.  As expected, trading throughout the first quarter was volatile   as we annualised against the high comparatives from last year.   

"Although there remains much uncertainty as to how consumer spending evolves over the coming months, we remain optimistic that our combination of exceptional value across a wide range of product categories and our convenient Out of Town locations will continue to resonate with customers."                                                                      

ii round-up:

Value goods and food retailer B&M European Value Retail (LSE:BME) today reported a 4.4% retreat in same-store UK sales as it overlapped pandemic fuelled strong comparatives. 

UK like-for-like sales on a two-year basis, providing a pre-pandemic comparative, rose by 21.3%. Total sales, and including its smaller French business and newly opened stores, rose by 3.1% to £1.19 billion on a currency adjusted basis.  

B&M shares fell by just over 2% in UK trading, having more than doubled since pandemic lows in March 2020. Year-to-date its shares are up around 9%. Shares for supermarket Sainsbury's (LSE:SBRY) are up by a quarter year-to-date.

B&M opened seven new UK stores during the quarter and shut down four. Sales for its French business rose by just over a quarter year-over-year to £68.5 million, with both this first quarter period and last year’s being impacted by six weeks of varying lockdown restrictions. 

Sales for its Heron Foods stores were summarised by management as "satisfactory," with total sales falling to £101.7 million compared to a pandemic boosted £113 million in the quarter period a year ago. 
 
Accompanying management outlook comments highlighted that the company remained on track with its plans for the year. 

A second-quarter and first-half trading update is expected late September.

ii view:

B&M Group was founded in 1978 and listed on the London Stock Exchange in June 2014. Today it operates 684 stores in the UK under the "B&M" brand, 308 stores under the "Heron Foods" and "B&M Express" brands, and 105 stores in France operating under both the "Babou" and "B&M" brands. A stock market value of just under £5.8 billion compares to that of Marks & Spencer (LSE:MKS) at under £3 billion. 

For investors, tough comparatives over coming quarters, given the previous boost from the pandemic, offers caution. An estimated price/earnings (PE) ratio above the three-year average also suggests the shares are not obviously cheap. But a historical and forecast dividend yield of 3% is not to be ignored, with a series of recent special dividends adding to shareholder returns. In all, and with B&M’s value offering likely to remain attractive in tough economic times, investor support looks to remain warranted.

Positives: 

  • Diversified product range
  • Focus on shareholder returns

Negatives:

  • Facing tough comparatives  
  • Exposure to currency movements 

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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