ii view: discount retailer B&M hit by weak sales and warning

First-half trading update to 27 September

• Total revenue up 4% to £2.75 billion
• UK like-for-like sales up 0.1%
• French like-for-like sales up 5.2%
• Total Heron Foods sales down 0.9%

Guidance:

• Now expects full-year adjusted profit (EBITDA) of £510-560 million

Chief executive Tjeerd Jegen 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.”

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ii round-up:

Under relatively new head Tjeerd Jegen, B&M European Value Retail SA (LSE:BME) today announced a new performance improvement programme as sales for the discount retailer’s core UK business remained disappointing. 

Accounting for around fourth-fifths of group-wide revenues, second-quarter same store sales to late September fell 1.1%, below management expectations and hindered by poor operational execution. B&M will focus on a new 12-18 month ‘Back to B&M Basics’ plan which includes price cuts and restoring product availability. 

Shares in the FTSE 250 company fell as much as 15% in early UK trading, later recovering to trade down around 6%. That’s after declining by close to a third year-to-date prior to coming into this latest update. The FTSE 250 index is up 6% so far in 2025, while supermarkets Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY) have gained by around a fifth so far this year. 

B&M’s adjusted profit for the current year to late March 2026 is now expected by management to come in at between £510 million and £560 million. That’s down from City estimates of around £620 million in June. 

B&M operates 786 variety stores across the UK, along with 344 Heron Food and B&M express stores, and 140 B&M branded outlets in France.

Overall sales for Heron Foods, generating around a tenth of group sales, fell 0.9% during the half year to £273 million.

Same store sales for the French business, representing a further tenth of overall sales, climbed 5.2% to total of £280 million. 

First-half results are scheduled for 13 November. 

ii view:

Founded in 1978 and opening its first store in Blackpool, B&M listed on the London 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 and Lidl, and even home focused retailers such as B&Q owner Kingfisher (LSE:KGF) and furnishings group Dunelm Group (LSE:DNLM). 

For investors, poor UK sales, hindered by poor operational performance and likely competition from online Chinese retailers such Temu, is not to overlooked. Higher UK business costs such as employee taxes now weigh on profit expectations. As with all retailers, the weather can influence demand, while the group’s ratio of net debt-to-adjusted profit (EBITDA) is expected to be above management’s target range of 1 to 1.5 times as of late September.

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More favourably, a performance improvement plan from the relatively new CEO and former Tesco executive is underway. A diversity of product and geographical location exists, with potential to increase French store numbers. An ongoing move in its corporate domicile is expected to increase flexibility towards shareholder returns, while a forecast dividend yield of around 6% is not to be ignored.

For now, B&M’s value focused customer offering in tough economic times is likely to keep it of interest to investors. That said, more cautious investors are likely to await signs of a UK sales and group-wide profit recovery. 

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