B&M expansion plans boosted by strong interim figures
Discount retailer B&M is powering ahead with better sales, profits and a significant store expansion strategy under way. It also increased its EBITDA guidance for the year, and said it is on course to double in size.
Announcing its interim results for the period to September 23, 2023, today, the group, based in Speke, South Liverpool, revealed a 10.4% increase in revenues of £2.549bn, pre-tax profits of £222m, up from £201m the previous year, and an increase in the interim dividend to 5.1p per share, up from 5p last year.
It said all stores are trading well with positive transaction numbers and new space growth. The group opened 28 gross new stores – 13 in B&M UK, 10 in Heron Foods and five in B&M France – and now expects to reach not less than 1,200 B&M UK stores in total, versus the previous guidance of 950, bolstered by its acquisition of a number of stores from failed retailer Wilko.
Chief executive, Alex Russo, said: “Another strong half year has seen the group deliver 10.4% total sales growth, 16.1% adjusted EBITDA (pre-IFRS 16) growth and £352m cash generated from operations.
“All four of our channels of growth are delivering strong results, underpinned by our relentless focus on low prices, cost control, simplicity in everything we do and disciplined profitable growth.”
He highlighted a number of achievements during the reporting period, including:
• Existing B&M UK stores saw like-for-like sales increase by 6.2%, with around half coming from increased customer transaction numbers and helped by the material step change in store operational standards – a key focus for management
• Opened 13 gross new B&M UK stores, a net increase of five stores, with total sales area outgrowing growth in store numbers. The group expects to open not less than 35 stores this financial period, and not less than 45 stores in each of the next two years
• France delivered total sales growth of more than 26%, with LFL sales growth in double figures. France remains on track for 10 new stores across this financial year, and at least the same number next year
• Heron Foods total sales were up 17% including nine net new stores. The division remains on track to open 20 new stores in this financial year
Mr Russo added: “The agreement to acquire up to 51 ex-Wilko stores is a significant step which underpins our opening programme. Over the next three years we expect to open not less than 125 new B&M stores in the UK, adding up to 20% to our sales area.
“I am delighted that many of our existing shareholders have been with us since our IPO and continue to see our long term growth potential. With our new store number guidance (of not less than 1,200 B&M UK stores) and continued LFL growth, we have the runway to at least double our size in the UK in the medium term, while France also offers sizeable long term potential.”
Outlining current trading levels, he said: “In the first six weeks of the Golden Quarter, B&M UK like for like growth has been 1.6%. Momentum has been particularly strong in the last three weeks, with LFL exit growth of 4.5%. The group is trading against tough comparatives making this a pleasing result against an uncertain and ever-changing economic background.
“This volatile background makes forecasting for the full year difficult. However, given the strong first half results and positive momentum, the group’s FY24 adjusted EBITDA (pre-IFRS 16) guidance is increased to a range of £620m-£630m, materially higher than FY23 performance (£573m).”
Shares in B&M fell in early trading following today’s announcement, dropping from the opening price of 510p per share to 504.20p.
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Despite upgraded guidance on earnings and store roll-out ambitions, discount retailer B&M was out of favour with the market on its latest update.
“A proposition of selling a range of discounted goods should chime with households which are looking to save money, so perhaps there was some disappointment at relatively sluggish like-for-like growth in the first six weeks of its ‘golden quarter’, even if the picture in the last three weeks has been more encouraging.
“An admission that volatile market conditions make forecasting tough may also have been in the minds of investors.”
