B&M pledges turnaround as it warns over profits after sliding UK sales

Budget retailer B&M has warned over annual profits after seeing sliding sales in the UK and soaring costs.

The group said UK like-for-like sales dropped by a worse-than-expected 1.1% in its second quarter, with the group now forecasting half-year underlying earnings will tumble by 28% to around £198 million.

This comes after it saw wage costs surge by about £30 million in its first half to September 27, on top of a £14 million packaging tax hit under the new Extended Producer Responsibility rules.

It said it now expects full-year underlying earnings in the range of £510 million to £560 million – a fall of up to 18% on the previous year.

The group said it was taking “decisive actions” to boost its flagging performance but cautioned these will take up to 18 months to bear fruit.

“We are confident they will restore B&M’s value proposition and support a return to sustainable like-for-like sales growth for B&M UK,” it said.

Turnaround measures include cutting prices of some of its key value items, bringing in more flexible “managers specials” promotions, refocusing and cutting the number of ranges it has and improving availability of its most popular products on shelves.

Recently appointed chief executive Tjeerd Jegen said: “Since becoming CEO in June, I have led the business through a comprehensive review of our customer proposition and operations.

“We have concluded that while B&M’s value proposition remains strong, our operational execution has been weak.

“This has impacted our first-half trading performance, and this is reflected in the full-year outlook.”

He added: “We have already sharpened our price position, and we are moving with pace to refocus our ranges, improve on-shelf availability and bring back excitement to our stores.

“We have more work to do, but we are confident these changes will restore consistent like-for-like sales growth over time.”

While the group said it had seen an improvement in UK like-for-like sales since the second quarter, it still expects trading to be impacted over the final six months, with a range of between a low single-digit drop up to a low single-digit sales increase.

B&M has 786 stores in the UK operating under the B&M brand, plus 344 stores under the Heron Foods and B&M Express brands, while it also has 140 stores in France.