Annual profits tumble at B&M

(Sharecast News) - B&M European Value Retail posted a sharp slide in annual profits on Wednesday after a "difficult" year which saw British sales weaken as costs rose. Group revenues at the discount retailer improved 3.6% in the year to 28 March to £5.78bn, supported by a 2.9% uplift in like-for-like sales in B&M France.

However, in the UK, like-for-like sales softened 0.1%, while Heron Foods saw revenues decline 0.3%.

Adjusted operating costs also rose sharply, up 11.7% at £1.65bn. B&M said it had been hit by increases to the minimum wage, higher employer National Insurance contributions and the recycling levy alongside growth in its retail estate.

As a result, adjusted earnings before interest, tax, depreciation and amortisation slumped 25.9% to £459m, while statutory pre-tax profits fell 47.3% at £227m.

Chief executive Tjeerd Jegen said it had been a "difficult year that saw profits fall due to a challenging market and execution issues".

Jegen, who joined a year ago, is seeking to revive the business and return the UK to like-for-like sales growth through the Back to B&M Basics turnaround strategy.

"The past six months have seen us sharpen our pricing, improve on-shelf availability in best-selling brands and revamp our in-store promotions," he said. "We cleared discontinued lines well in the fourth quarter, and are now embarking on a SKU (stock keeping units) count reduction across all our fast-moving consumer goods categories."

Looking to current trading, and B&M said that while the garden season had experienced a slower start year-on-year, warmer weather in late May had since driven a recovery in sales of seasonal categories. It also flagged upward pressure on international freight, fuel and energy costs due to war in the Middle East.

However, Jegen insisted he was "confident that we have sufficient levers to offset this impact with cost mitigation. Over time, these benefits will flow through to our bottom line once we have returned B&M like-for-like sale to growth.

"In the medium term, we continue to see no reason why B&M UK cannot return to double-digit EBITDA margins."

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