B&M European Value Retail Lowers Profit Outlook, Shares Plummet

B&M European Value Retail reported strong revenue growth in the UK and France, with a YoY increase of 2.8% and 12.5% respectively. However, shares sank 12% after the company lowered its FY25 EBITDA guidance to £590m-£620m. Despite robust seasonal sales and solid gross margins, B&M's adjusted EBITDA forecast was revised downwards due to tightened disposable incomes in its key markets.

B&M European Value Retail, the UK's leading variety goods discount retailer, reported a robust revenue growth of 2.4% in the first quarter of its financial year, with contributions from both the UK and French markets [1]. However, shares in the company took a 12% hit after the retailer lowered its full-year 2025 earnings before interest, tax, depreciation, and amortization (EBITDA) guidance to £590 million-£620 million [1].

Despite the strong revenue growth, B&M's adjusted EBITDA forecast was revised downwards due to tightened disposable incomes in its key markets. The company's UK like-for-like (LFL) sales growth, which excludes the impact of new store openings and inflation, was 3.5% in the first quarter, down from the exceptionally strong growth of 9.2% in the same period last year [1].

B&M's Chief Executive, Alex Russo, attributed the growth fundamentals of the business to a highly disciplined approach on pricing, product, and high operational standards. He emphasized the company's commitment to offering customers exceptional value at a time when household incomes are under pressure [1].

The retailer's strong performance in the first quarter was driven by volume growth and a disciplined store opening program across the three businesses. B&M opened 19 gross stores in the UK during the first quarter, with plans to open 45 gross new stores in the year [1]. In France, the company added two new stores and is on track to open 11 new stores this year [1].

B&M's gross margin performance in the UK was strong and in line with expectations, driven by high sell-through rates in categories such as gardening [1]. The company's logistics capacity across the UK and France continues to support volume growth well, with additional capacity underway in France [1].

Despite the lower EBITDA guidance, B&M remains confident in its prospects for profitable cash generating growth across the full financial year, underpinned by its strong fundamentals and normalizing comparatives [1]. The company is expected to release its half-year financial results for the 26 weeks to 28 September 2024 on 14 November 2024, when it will provide full-year narrow guidance as normal [1].

References:
[1] B&M European Value Retail S.A. (2024, 12 July). BM European Value Retail Reports 2.4% Revenue Growth in Q1 2024. Directorstalkinterviews.com. https://www.directorstalkinterviews.com/bm-european-value-retail-reports-2.4-revenue-growth-in-q1-2024/4121165165