Value retailer B&M has recorded a significant fall in half year profits after it wrote down the value of its loss-making German unit Jawoll and put it under review. However, the core UK business continued its robust growth and maintained its ambitious store opening programme.
Over the 26 weeks to 29 September, the group’s pre-tax profit plummeted 70.5% to £32.2m, mainly as a result of an impairment charge of £59.5m relating to Jawoll. Adjusted pre-tax profit dropped by 2.8% to £96m due to losses of £12.2m in the German unit. Group revenues rose 12.4% to £1.76bn.
B&M stated that the continued disappointing financial performance of Jawoll, which operates 98 stores generating revenues of £114.7m, was due to distribution issues and weak sales performance. A strategic review is now underway to “determine the future of the business”.
Meanwhile, the group’s B&M chain in the UK saw EBITDA grow 13.7% on revenues up 13.8% to £1.46m. Like-for-like sales increased 3.7% with “solid” growth in the third quarter so far.
Gross margin improved by 2 basis points as the impact of a roll-out of a wider grocery offering moderated in the half. B&M stated that it had seen strong growth in some general merchandise categories, most notably in homewares and indoor furniture.
There are now 645 stores operating under the B&M brand following the opening of a net 25 outlets during the period. The group stated it was on track to open at least 46 net new stores this financial year as part of its plans to open more than 300 over the next five years.
Its Heron Foods chain also continued to trade well with EBITDA up 24.8% to £12.3m on revenues that increased 7.5% to £188.2m. The grocery retailer now has 290 outlets after a net 9 new openings.
Simon Arora, B&M Chief Executive, said: “We are well placed for the golden quarter in our main B&M UK stores business. Despite the continued uncertainty in the economic environment generally, we are very proud to say that each of the top five store opening days in our history have all been in stores we have opened in the last 12 months.”
He added that the company was “virtually immune” from Brexit given its low selling prices on products sourced overwhelmingly from outside the EU.
NAM Implications:
- Time for B&M to back its winners…
- i.e. focus on the UK, particularly as it seems insulated from Brexit downsides…
- At a later stage the UK formula can then be rolled out abroad…
- Meanwhile, more than useful for NAMs to secure and maintain a fair-share piece of the B&M UK action…
