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B&M European Value Retail Q3 Results – What The Analysts Said

By Steve Wynne-Jones
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B&M European Value Retail Q3 Results – What The Analysts Said

Discount retailer B&M European Value Retail has reported what it described as a 'strong' third quarter, seeing revenue up 5.0%, while like-for-like revenue in its UK business in the 14-week period to 30 December (i.e. including Christmas), was up 1.2%.

Commenting, Alex Russo, the group's chief executive, said that the retailer's performance across the so-called 'Golden Quarter' had been "pleasing, with strong operational execution" across its three businesses, B&M UK, B&M France and Heron Foods.

Here's how industry analysts from AJ Bell, Liberum, GlobalData, Shore Capital and Stifel viewed its performance.

Russ Mould, AJ Bell

“Aldi and Lidl’s strong Christmas trading updates last week implied shoppers were turning to the discounters in their droves and B&M has come within a whisker of joining the celebrations. While its third quarter trading period was robust, including a decent showing from its Heron Foods arm, the pace of growth has slowed down from the rate reported at its half-year results.

“B&M is a general merchandise group and has its fingers in many pies, meaning it is a good bellwether for the retail sector. A slowdown in sales growth has become a common theme in the retail industry, particularly among fashion sellers. While disappointing that B&M has joined the club, it is not alone in suffering this fate.

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“Investors can find reassurance that a 20p per share special dividend may not have been declared if management was feeling worried about the outlook. Yet the market reaction to the trading update understandably portrays a tone of disappointment on behalf of investors.

“The business continues to expand with new stores, which creates more opportunities to reach a bigger customer base, and the long-term opportunities remain rich. However, the best way to sum up B&M’s latest trading update is ‘fine but not fantastic’. It means the retailer will have to try harder to get the tills ringing faster in 2024.”

Adam Tomlinson, Liberum

"Q3’s profitable growth represents a very resilient outturn, allowing for the reiteration of guidance and a 20p special dividend. Critically general merchandise categories achieved strong sell-through and stock is in a very clean position – giving confidence around gross margin – much more important than LFL sales growth.

"The predictability of B&M’s model is driven by market share gains from a ‘cookie-cutter’ store roll-out and its disruptive, value-focused offer. 20%+ ROIC enabled FY20-23 total dividends worth 30% of market cap. The shares are up 25% over the past 12 months to currently trade on 12-month forward PER of 15x (for a three-year forecast PBT CAGR of 7%)."

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Sophie Mitchell, GlobalData

“B&M’s strategy of an aggressive rollout of stores to drive UK growth remains unchanged, as it intends to open no less than 45 new B&M UK stores in each of the next two financial years and looks to penetrate southern areas of the UK in particular. It is unlikely that B&M’s popularity will dwindle anytime soon, with many consumers still facing cost-of-living pressures, looking to the retailer for its low prices across a wide range of categories.

"Its strategy of complimenting the growth of Aldi and Lidl, co-locating stores near the grocers, is likely to provide further success for B&M, giving consumers a place to stock up on a wider range of non-food goods and branded favourites, as the two grocers continue to focus on own-label products.

"The gradual opening of the 51 former Wilko stores B&M acquired will also aid the retailer, adding to its town centre locations and helping to diversify its shopper base.”

Clive Black, Shore Capital

"[B&M] is a top-quality operator in the UK bargain store arena, in our view, with a stabilised French operation and an interesting potential growth pole in Heron Foods. Overall Q3 FY24 trading is sound against a very challenging comparative and there is no issue reiterating EBITDA guidance where c9% YoY growth in challenging markets is delivered.

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"On a major store base with high sales densities, driving growth will not become easier after a period of arguably unnatural business in a UK economy where squeezed living standards drove traffic. Hence, we see Group RoCE and new store RoIC as key metrics to keep an eye on going forward. Investors may be particularly interested in the lack of disclosure YoY and the B&M UK Food performance at this time."

David Hughes, Stifel

"B&M saw a slowdown in its growth rate over the festive period partly due to tougher YoY comps, with sales up 5% in 3Q versus 8.1% YTD. However, despite the slowdown, B&M still saw positive LFL growth across its fascia and has reiterated guidance for c.9% EBITDA growth for FY24E.

"This guidance, combined with an announced special dividend of 20p, gives some reason for festive cheer."

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