Shares in B&M European Value Retail fell sharply this morning after it warned that its profits for the full fiscal year are expected to be below that of the levels it reported in the last two pandemic-affected years. The results were announced even as the value retailer revealed a change in CEO.
For the 52 weeks to 26 March 2022, revenues were down 2.7% to £4.67bn (-2.4% on a constant-currency basis), while adjusted EBITDA declined by 1.2% to £619m, and adjusted pre-tax profit slid by 3% to £524m.
The revenue was led by a 4.1% drop to £3.91bn at its B&M UK operations and supplemented by 0.9% decline to £411m at Heron Foods, both of which offset a 14.2% jump to £353m in sales at B&M France.
During the year, B&M opened 34 new stores (including two relocations) and shut 12 others in the UK, ending the year with 701 outlets operational in the country. Meanwhile, Heron Foods opened 16 new outlets while shuttering 11, ending the year with 311 outlets. Finally, in France, the group expanded its store network to 107 outlets, with the addition of three new outlets.
Simon Arora, Chief Executive of B&M, said he was “very pleased with the results we have delivered … we have sustained the step up in sales and profit compared to pre-pandemic levels.” He added that given the current high-inflation environment, B&M is “well positioned to support the communities in which we trade and continue our long-term growth strategy.”
However, looking ahead, Arora admitted that “some level of markdowns are expected to return”, which could have “an adverse impact” as customer spending shifted from higher-margin General Merchandise categories towards Food and FMCG products. For fiscal 2023, B&M expects adjusted EBITDA margin in the UK to fall by 70-130bps. Additionally, group adjusted EBITDA is expected to be in the range of £550m to £600m, down from the last fiscal year.
The results sent shares in the company down 9.6% as of 11am BST.
B&M also announced the appointment of Alex Russo as its next Chief Executive, following the previously-announced departure of Arora. Russo, currently Group CFO, will succeed Arora on a yet-to-be-announced date.
Russo has been with B&M since October 2020, having previously heled senior leadership positions at Asda, Tesco, and Kingfisher, both in the UK and internationally. A process to recruit his successor as CFO has already begun.
NAM Implications:
- Shares have more to fall? i.e. B&M shares are 4.1% shorted this morning
- Key that B&M drive ROCE, i.e. improve net margins and increase Capital rotation.
- For suppliers, this could mean pressure on cost prices and smaller, faster, more frequent deliveries.
