B&M’s and Heron Foods boss says that customers who were struggling to pay for their daily expenses chose the cheaper competitors.
B&M European Value Retail’s group revenue grew by 6.6% to £4.9 billion during the year ending March 25, a 30.7 percent increase over pre-pandemic levels.
Analysts had predicted a rise of 8.3 percent in sales like-for-like for the UK unit during the first nine weeks. However, the actual increase was 8.3 percent.
Discount retailers generally perform better than their mainstream counterparts as consumers are more price sensitive, and their low-cost base has supported margins.
Alejandro Russo is the CEO of the FTSE 100 retailer that sells everything from frozen food to garden furniture and toys. He said: “I see good trade-down from competitors at higher price points. Since June of last year, till receipts have consistently increased every month. “Our customers are driving sales, and our prices are leading the market.”
He said that the company has seen a particularly high demand in the home and garden category, with customers purchasing textiles, decor and DIY to renovate their homes.
Despite an increase in sales, the pre-tax profit at the group dropped by 12.6% to £436 millions in the year ending March 25 from £525million the previous year. The company reported a core adjusted profit of £573 millions for the same time period, which was down 7.4 percent from last year. This is in line with expectations.
The company said that it had to deal with “major headwinds in the economy” and “material costs pressures”. Russo stated that the company had to increase prices in certain categories due to inflationary forces, just like the rest.
Russo, however, said that he had begun to notice a deflation of some parts of the supply chain.
We will return any excess cash to our shareholders in accordance with the capital allocation framework, if we do not have the opportunity to acquire a large number of stores.
B&M European Value Retail, a British multinational chain of variety stores founded in 1978 in Luxembourg. The group operates 700 shops in Britain, 306 Heron Foods stores and 104 Babou stores in France.
Russo stated that the company would be opening 30 new B&M shops in the UK within the next 12 months, “from Northern Ireland all the way down to Sussex”. It wants to open 950 B&M stores in the UK within the next few decades.
B&M’s boss confirmed that there are no plans to launch an online transactional site. “We have tried online before, but it is not compatible with a low cost business. We are very happy to not operate online, and our proposition is very clear. “It’s all about store standards, bestsellers and limited ranges.”
Early trading saw shares of the company up by 27p (5.87%) to 499p. The stock price has increased by 28 percent in the last year.