Discount store operator B&M expects its full-year profit to come in at the top end of its guidance after recording a 10.1% rise in revenues to £5.5bn, driven by new stores and robust growth in its existing outlets.
In a brief post-close trading statement, the retailer said it expected to report adjusted EBITDA of £629m for the year to 30 March. That is at the top end of its guidance of £620-630m and 9.8% above the £573m it made the previous year.
The group’s core B&M fascia in the UK saw like-for-like sales rise 2.9% in its fourth quarter, driven by “strong volume performance” across both its FMCG and general merchandise ranges. Though that was an improvement on third-quarter growth of 1.2%, the outcome benefitted from an early Easter and was a touch short of analysts’ expectations.
For the full year, B&M’s like-for-likes grew 3.7%, driven by increased shopper transaction numbers across its 741 stores. The group opened 47 B&M stores in the UK during the period, with the former Wilko sites it acquired last year performing ahead of expectations. It plans to open at least 45 stores in each of the next two financial years.
The group did not reveal like-for-like figures for B&M France and Heron Foods, but both recorded healthy increases in total revenues, up 22.1% and 18.1% respectively.
Chief Executive Alex Russo stated that the group’s “relentless focus on everyday low prices (EDLP), great product ranges and excellence in operational standards” had chimed with consumers.
However, shares in B&M were down nearly 2.5% in early trading, with analysts saying the market had anticipated a stronger EBITDA outcome and better sales growth over Easter.
Commenting on the results, Danni Hewson, Head of Financial Analysis at AJ Bell, said: “The demise of Wilko should have benefitted B&M over the past six months as a key competitor was removed from the market. The jury is still out as recent performance has been disappointing.
“On one hand, guidance for adjusted earnings to come in at the top end of previous guidance is vindication that B&M’s strategy plays well to an uncertain economic backdrop. Its products are affordable and when consumers are watching every penny, value propositions shine through and through.
“However, B&M’s performance is not quite as solid as you might think. It’s clear that an earlier than normal Easter has pulled forward some sales which might have normally occurred in early April, outside of the trading period being reported. Had it been a ‘normal’ Easter date, it seems as if B&M’s trading update might not have been so bullish. Even with the Easter boost, fourth quarter UK like-for-like sales growth of 2.9% looks pedestrian. It implies that the company is finding it harder to keep churning out the success that has made it one of the big retail winners over the past decade.
“While the company continues to find ways to expand its store estate and plant flags in more territories, the competition is heating up with many other retailers and grocers offering more value-priced products with great success.”
Clive Black, Director at Shore Capital, added: “B&M has ground out FY24 in its core chain in the UK. In an inflationary market, its FMCG sales are well behind the pack, so losing market share we believe, that is we do not contend that B&M is gaining volume share. Such a fact suggests a rational firm is carefully managing gross margin, costs and cash, whilst complaining about dynamics in the FMCG scene.
“Overall exit trade for FY24 is modest to us, which raises questions about competitiveness in FMCG, the scope to absorb higher operating expenses, and ultimately, whether the estate, which has clearly been through its most potent period, is now in a more mature, and so cash compounding phase. For discount chains, such a position is not easy to admit, but it may mean deteriorating ongoing returns, either on new space or in the core.”
NAM Implications:
- ‘No satisfying some people?’
- Realistically, analyst reactions may spur B&M on to greater effort, just on principle…
- And given they are in better shape than most in pursuing a profitable value policy…
- …one worth keeping an eye on.
