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B&M Value Retail shares surge on 2024 outlook

By Frank Prenesti

Date: Wednesday 31 May 2023

(Sharecast News) - Shares in B&M surged on Wednesday after the discount retailer said it expected current adjusted core earnings to be higher as it posted a fall in annual profits, but reported almost £5bn in sales as customers sought food and goods bargains amid the cost-of-living crisis.

The company, which owns discount retail stores in the UK and France, said like-for-like sales in Britain were up 8.3% in the first nine weeks of the current fiscal year.

Pre-tax profit fell 17% to £436m, as revenue rose 6.6% to £4.9bn. Adjusted core profit fell 7.4% in the year to March 25 to £573m.

However annual margins fell to 11.5% from 13.2% a year ago, hit by a first-half downturn in its UK store sales.

New chief executive Alejandro Russo said B&M, which sells a wide range of goods from frozen food to garden furniture, was "actively responding to the short-term pressure on consumers from the cost-of-living crisis, with a relentless focus on price and value".

"A strengthened management team and the hard work of our 39,000 employees executing our unchanged strategy will help us deliver in the current financial year. We expect to grow sales and profits in FY24, despite economic uncertainty."

Russo said many consumer trends were now favouring B&M, including trading down, as shoppers sought value at the German challenger chains Aldi and Lidl "which remain heavily focused on own label".

"Our branded offer is highly complementary to them. Independent research shows that most (Aldi & Lidl) shoppers also shop elsewhere, and where we are co-located, our stores tend to trade exceptionally well. This is as true in France as it is in the UK."

The group opened 21 new stores over the year, offset by 15 closures and relocations and currently has 707 stores in the UK as well as owning Heron Foods.

"We will accelerate our new store openings back towards 40 stores per annum, with c.30 expected in FY24, but focus will always remain on new stores generating a leading return on investment."

B&M was up against tough comparators as it benefited from being an essential goods supplier during the Covid pandemic, and was able to keep its stores open.

"Its performance during this period therefore comes with an asterisk attached, which is why investors will be particularly pleased to see its value credentials paying off in a more normal retail environment," said AJ Bell investment director Russ Mould.

"In theory B&M should be well placed against a backdrop where households are really watching their pennies and that is largely reflected in this latest trading update. The company is also generating lots of cash which it can return to shareholders."

"There is the odd warning sign here and there though, which the market may give some attention to. In particular, the company's inventory position has increased a touch - hinting at a potential slowdown in non-food sales."

Reporting by Frank Prenesti for


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