B&M European Value Retail Reduces Profit Forecast Following Weak Sales

B M European Value Retail has downgraded its profit outlook for the third time within its current financial year. This adjustment follows a disappointing Christmas trading period in the United Kingdom and ongoing underperformance at its Heron Foods chain.

The discount retailer revised its full-year adjusted earnings before interest, tax, depreciation, and amortisation guidance to between £440 million and £475 million. This marks a reduction from a previous forecast of £470 million to £520 million. Management attributed this decline to persistent challenges in its supermarket chain, where a customer offer is currently under review.

Despite this setback, B M’s shares experienced a modest increase of 1.9 per cent in response to analysts’ recognition of early signs of recovery. This uptick occurred during a period when overall sales rose by 2.9 per cent year-on-year for the three months ending in December. This growth was significantly bolstered by an 8.5 per cent increase in sales in France, which helped mitigate weaker performance in the UK and at Heron Foods.

The contrast between different regions was notable. On a like-for-like basis, B M sales in the UK declined by 0.6 per cent. Sales at Heron Foods similarly saw a slight dip of 0.1 per cent. In contrast, French operations recorded a marginal growth of 0.4 per cent on a like-for-like basis.

Trade dynamics over the past few months reveal that October and November were particularly challenging periods for B M in the UK. Reduced consumer spending during this time can be linked to uncertainties related to the autumn budget. However, demand saw an uptick in December, with sales increasing by 3 per cent as consumer confidence began to recover.

The new chief executive, Tjeerd Jegen, has implemented a “back to basics” strategy aimed at enhancing the retailer’s operational efficiency. This approach involves lowering prices, refocusing product ranges, and improving both availability and the in-store experience. Thus far, prices on approximately 35 per cent of key value items have been reduced.

Jegen has faced numerous challenges since his appointment in June, including an accounting error that resulted in the exit of the previous chief financial officer. An investigation into the error has concluded, and recommendations regarding financial and IT operational processes are currently being executed. Jegen expressed confidence that the measures being taken will foster sustainable growth over the next 12 to 18 months.