Discount retailer B&M European Value Retail S.A. has reported a 2.2% decline in group revenue in the first quarter of its financial year, with its UK business seeing tough like-for-like comparatives for the month of April in particular.
The group expects adjusted EBITDA for the full year to be in the range of £550 million (€638.2 million) to £600 million (€696.2 million). Here's how leading retail analysts viewed its performance.
Russ Mould, AJ Bell
“Value retailer B&M should have been in its element as the country faces a stalling economy. Its cheap prices appeal to cash-strapped individuals who are watching every penny and people looking to trade down from more expensive retailers. However, a drop in sales would suggest this tailwind is not as strong as previously thought.
“The company argues that some of its sales figures were distorted by having very tough year-on-year comparative figures to beat. If you look beyond that trading period, the decline in sales hasn’t been as bad in recent weeks.
“Encouragingly, B&M has followed Primark by finally dipping its toe in the water when it comes to e-commerce. A home delivery trial has begun to see if there is enough demand for online purchases of bulkier and higher ticket items.
“That presents an opportunity to increase sales, yet whether such a service would contribute to profits near-term is unknown. Typically, online services need to run on a large scale to make money, so even if B&M moves from a trial to a national rollout, there is no guarantee the service will put cash in its pocket after paying for costs anytime soon.”
Eleonora Dani, Shore Capital
"B&M remains a well-managed company with sound cash generation and tight cost controls. [...] While slightly better than feared, today's statement might not be enough to move our estimates to consensus (both already at the lower end of the guided range), as we remain concerned about inventory levels and loss of food price leadership.
"B&M is firmly in the retail value for money camp, however we see challenges ahead due to the cost of living squeeze, particularly among B&M's lower-income consumers."
Matt Walton, GlobalData
“There are positives in B&M’s Q1 results, despite the retailer recording its fifth consecutive quarter of declining like-for-likes in the UK, which was largely due to an elevated sales figure in April after two years of pandemic disruption.
"The launch of its home-delivery trial in late June is the main development during the period, with B&M selling around 1,000 SKU’s online for home delivery in categories such as furniture and garden. This is a sensible move as B&M will now have a greater presence in space-intensive categories which are hard to display in store and difficult for customers to get home.
"It also enables B&M to tap into demand for furniture among prospective customers, with the retailer being among the most-considered retailers for furniture in GlobalData’s quarterly home tracker survey of 5,000 UK consumers.
"The cost and time for delivery is also reasonable given the price point with a maximum charge of £34.95 and customers receiving their goods from seven working days for its largest items, which is mainly for garden products. Most products, however, are charged at £7.95 and are delivered in up to five working days.
"Driving traffic to its website should not be a concern either, with B&M recording 84 millon site visits in its FY2021/22 despite being non-transactional except for its range of garden structures. We expect this trial to be a success and once it is more established, improving product visuals should be B&M’s next step."
Adam Tonlinson, Wayne Brown, Anubhav Malhotra, Liberum
"The Q1 update is as positive as we could have hoped for. The most recent trading, with B&M UK LFLs down just 1.6% y/y in May-June is very encouraging. It should reassure that the sequentially improving LFL trend for the rest of the year that is baked into management’s guidance is achievable.
"There is no change to FY23E adj. (pre-IFRS 16) EBITDA guidance of £550m-600m, which at the mid-point is 68% above FY20’s pre-COVID level, highlighting management’s confidence in retaining much of the gains made over the past couple of years.
"While the most recent trading covers only a few weeks, if the trajectory is maintained, then upwards pressure on consensus should emerge as we move through the coming months. With the shares -40% YTD and -30% over the past 12 months, and now back down at pre-COVID levels, this is a great time to be looking."
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