British discount retailer B&M said it was "well positioned" for the key Christmas quarter as it reported a 2% rise in first-half core earnings, with trading on an improving trajectory.
The FTSE 100 retailer, which sells everything from garden furniture and electrical items to toys and food, said on Thursday that although the consumer environment "remains uncertain" its focus on competitive prices and on improving products and standards was paying off.
"With growing volume momentum, and with broadening strength in general merchandise, we are confident in our outlook for the second half and the full year," B&M said.
Forecast Adjusted Earnings
It forecast adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), its preferred profit measure, for 2024/25 in the range of £620 million to £660 million (€745-€793 million), versus the £616 million (€740 million) made in 2023/24.
Earnings on the same basis in the first half to 28 September were £274 million (€3.17 million), on revenue up 3.7% to £2.64 billion (€3.17 billion), helped by 39 gross new store openings.
Like-for-like sales in B&M UK improved from a fall of 5.1% in the first quarter, when wet weather dented sales, to a fall of 1.9% in the second quarter.
Low-Cost Approach
Alex Russo, Chief Executive, said, "This is a good performance as we annualise a record prior year of earnings growth with strong first half comparatives.
"We continue to execute with Everyday Low Price integrity for all our customers, with industry leading availability and excellence in operational standards.
"Our model is underpinned by a disciplined and low-cost approach across all three of our businesses, focusing on simple, sustainable growth, delivered through the hard work of our teams.
"Our product ranges across both grocery and general merchandise resonate very well with customers at a time when disposable incomes remain under pressure and the tax burden continues to increase.
New Import Centre
"To future proof this volume growth, I am pleased to announce that next year we will open a new imports centre in Ellesmere Port.
"This facility will manage inbound container flow and optimise the capacity of our five existing B&M UK distribution centres which are handling ever-growing volumes.
This is the right productivity step to support both our short and long-term growth plans, including our target of not less than 1,200 B&M UK stores.
We are currently extending our French distribution centre demonstrating the growth plans in place for France.
Analyst Comments
“Discount chain B&M has had a rough year and while these latest first-half results didn’t exactly knock it out of the park there was enough encouragement for investors to latch on to," stated AJ Bell investment director, Russ Mould,
“B&M has big ambitions for the less heralded French business and evidence of progress here would likely be well received by the market.
“There may be a touch of disquiet at a lack of guidance on third-quarter trading and the ‘Golden Quarter’ could be a moment of truth for B&M. It faces a tough competitive environment, with pressure not only from direct rivals like Home Bargains but also the supermarkets.”
According to an analyst note from Shore Capital, 'B&M has been a bit of a rags to riches story, one that many shareholders, including its now departed from the firm's founders, did very well with. However, the engine has cooled materially, and this H1 performance fulfils all of our prior apprehensions.
'Lesser transparency is a sign of stress to us, whilst we ask whether new stores are deteriorating in their momentum, if not then the core estate is going back apace; the 1,200 store target feels fanciful.'
'We would expect downgrades to consensus on the back of this update, noting the material and largely deserved de-rating of the stock, where we look to find its floor. B&M is not a bad company, far from it, but it may be a real case of travelling and arriving though, so needing a strategic pivot to progress in new and more challenging markets.'
Additional Reporting By ESM.
