Discounter B&M said it expected to win market share from more expensive rivals in the coming year and maintained its profit guidance, but its shares were among the day’s biggest fallers after it reported a drop in sales and profits.
The group said a 0.9 per cent decline in same-store sales at B&M’s 704 UK stores, which account for around four-fifths of total revenue, was mostly because of a weaker first quarter compared with last year.
Adjusted earnings before interest, tax, depreciation and amortisation for the six months to September 24 fell 17.9 per cent to £232mn as the company was forced to discount surplus outdoor furniture and gardening stock, but chief executive Alex Russo said he expected margins to recover.
“Our price position is very sharp and our stock position is clean going into the final quarter . . . every single week our like-for-likes have been going up.”
“I am confident we can take market share . . . we just need to ride that cycle,” he added.
Same-store sales in the first six weeks of the third quarter rose 2.5 per cent in the core B&M estate and the group said it still expected to report underlying earnings of £550-£600mn for the year to March 2023.
RBC analyst Richard Chamberlain said the company should benefit from cash-strapped customers trying to economise but cautioned that “various headwinds will make it more difficult to increase earnings meaningfully over the next two years”.
He cited tough comparatives, rising wage and energy costs, more discounting by rivals and a stronger dollar, which makes the stock that B&M imports from Asia more expensive.
Shares in the company were down more than 5 per cent in London lunchtime trading.
Russo said the company was largely insulated from the appreciation of the US dollar for now. “We are hedged at a good rate all the way out to September 2023.”
He added that the business was “starting to see down trading” as consumer incomes were squeezed, particular at its smaller Heron Foods chain. “[Heron] is the area where price point is sharpest. We are seeing very rapid improvement in transaction numbers there relative to footfall”.
B&M’s sales boomed during the pandemic. Because it sells food it was classed as an “essential” retailer and allowed to keep its stores open during lockdowns. It has also succeeded in attracting more middle-class shoppers by opening stores in wealthier areas.
Russo said he would stick with the target of 950 UK stores set by his predecessor Simon Arora, who along with his brother Bobby largely created the business in its current form during an 18-year tenure, before announcing his retirement earlier this year.