Discounter B&M European Value Retail has posted like-for-like revenue growth of 3.9% in its core UK market in the first quarter of its financial year, while group sales revenue was up 21.4% in the period.
"The Group has made a solid start and we are on track with our plans for the year as a whole, with a strong performance in the B&M UK business and continued implementation of our planned change programmes in Germany and France," commented Simon Arora, the group's chief executive.
Here's how leading retail analysts viewed its performance.
Matt Walton, GlobalData
"B&M’s prospects remain positive, as it is set to open a net of 45 stores in the UK in FY2019/20, it will continue to benefit from consumers remaining cautious and is still on course to record profit growth, despite the drag caused by Jawoll. However, the level of competition B&M faces remains fierce.
"Both B&M and Home Bargains have aggressive expansion plans, which will inevitably dampen sales growth for both, and as B&M grows its presence within chilled and frozen food it will be competing more directly with Aldi, Lidl and The Range, who have partnered with Iceland in some stores.
"B&M’s FY2019/20 performance will continue to be buoyed by its enhanced homewares offer, as it goes up against a soft l-f-l comparison, and it should aim to incorporate elements of this refresh across its other ranges to help B&M stand out.''
Liberum Capital
"This update should be seen as reassuring overall, giving confidence to our full year group forecast. We are hopeful that gradual improvements internationally can help to deliver a more sustainable performance abroad, as the good momentum in the core UK business continues.
"There are some questions to answer – (i) returns on new stores - UK stores continue to generate high cash returns but we cannot assess incremental cash returns on capital investment for new stores based on the group's current disclosure. Being able to verify that paybacks on more recent openings are not materially deteriorating would be reassuring; and (ii) international – five years since IPO and the group's international credentials remain unproven.
"This is frustrating. Leveraging the core B&M supply chain, developing a product offer that resonates with local shoppers and supporting this with efficient logistics are key. This is taking time and we do not forecast much profit for international on a three-year view. That said, the group's current market capitalisation does not seem to give much credit for non-UK operations, so there is option value, in our view."
Greg Lawless, Shore Capital
"The outlook statement highlights that the company has made a solid start to FY2020 and remains confident about continued profit growth in the year ahead. We note the confident tone outlined by the company. Bloomberg consensus is for revenue growth of 15% to £4.0bn and EBITDA growth of 11.5% to £348m.
"In terms of valuation, B&M trades on a forward one year (year to March 2020) PE multiple of 16.8x, falling to 14.3x in FY2021. On an EV/EBITDA multiple of 12.1x in FY2020, falling to 10.6x in FY21. In our view, these are solid results particularly the UK performance with good LFL sales progression, despite the tough comparatives. The issues at Jawoll and Babou continue to be managed as their operating models adapt to the B&M direct sourced ranges.
"Discount retailing continues to resonate with consumers and the rollout of UK stores continues at pace."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
