B&M in line for sales fall but looks set to benefit from switch to budget brands

Budget retailer B&M is expected to report a downturn in sales amid a squeeze on shopper budgets due to the cost-of-living crisis.

B&M reported strong profits for the last financial year, but its first quarter figures on Wednesday could show a drop in revenues, analysts predict.

The vast majority – 93% – of all products sold by the high-street chain cost less than £20, meaning it has been so far less exposed to consumers cutting down on higher ticket items in recent months.

But analysts suggest the retailer has struggled to pass on cost inflation to customers which has kept prices low for shoppers, but could eat away at profits for the firm.

B&M said its sales fell 13.2% in the first two months of the 2023 financial year compared with the same period in the 2022 financial year, and fell 11.5% from the 2021 financial year.

This is despite revenues growing by 22.5% in the year to March 2022 compared with the same period in 2020.

Bosses have warned the outlook for the business is uncertain with the impact of soaring inflation on product prices and consumer spending yet to be felt.

Analysts at Shore Capital suggest there will be more cut-priced items across its stores this year in efforts to get rid of stock but this could hit profit margins.

While B&M’s grocery arm, Heron Foods, has seen strong sales from inflated food prices and shoppers returning to stores after the pandemic, it faces greater competition with supermarkets such as Tesco matching low prices with its Clubcard membership scheme.

Households have been cutting back on food shopping in the past two weeks as a result of higher prices, the Office for National Statistics said on Friday.

B&M chief executive Simon Arora said in May that shoppers tightening their belts could impact sales but may also lead to a rise in new customers looking for lower-priced products.

Analysts at Liberum recently said: “B&M’s variety discount offer puts it in a very favourable space given the squeeze on consumers’ finances.

“Year-to-date industry data shows shoppers are already switching from supermarkets to the discounters Aldi and Lidl, and B&M should also benefit from this trend.”