B&M forecast higher core earnings for its 2023-24 financial year, as customers snap up budget food and goods in the cost-of-living crunch.
Group sales in the year to 25 March rose 6.6 per cent to around £5billion with the the FTSE-100 retailer buoyed by shoppers switching to cheaper alternatives, including own label goods, an area where B&M has performed well over recent years.
‘We are actively responding to the short-term pressure on consumers from the cost-of-living crisis, with a relentless focus on price and value,’ B&M’s boss, Alejandro Russo, said.
B&M shares rose sharply today and were up 6.34 per cent or 29.90p to 501.80p this morning, having risen over 28 per cent in the last year.
The group opened 21 new stores over the year, offset by 15 closures and relocations. Its net debt by the end of the fiscal year was £724million.
It said: ‘We will accelerate our new store openings back towards 40 stores per annum, with c.30 expected in FY24, but focus will always remain on new stores generating a leading return on investment.’
The group added it would ‘not open unprofitable stores just to meet a store opening target’.
Shoppers have been buying more own label lines, which are usually cheaper than branded products, therby helping discount retailers outperform their mainstream peers.
Sales of own-label products at UK supermarkets have grown at double the speed of branded goods this year, recent data from market researchers NIQ showed.
B&M, which sells everything from toys to frozen food and garden furniture, reported adjusted core profit of £573million for the 12 months ending 25 March, down 7.4 per cent from the previous year.
The company had expected adjusted earnings before interest, taxes, depreciation, and amortization of £560million to £580million.
B&M’s sales, which had been given a boost from Covid-induced demand for essential items, continued to perform better than pre-pandemic times.
Its annual margin, however, fell to 11.5 per cent from 13.2 per cent the year before, hit by a first-half downturn in its UK store sales.
Like-for-like sales for its UK unit in the first nine weeks of the new financial year were up 8.3 per cent.
Russ Mould, investment director at AJ Bell, said: ‘During Covid B&M benefited as one of a handful of retailers which were able to stay open and operate.
‘Its performance during this period therefore comes with an asterisk attached, which is why investors will be particularly pleased to see its value credentials paying off in a more normal retail environment.
‘In theory B&M should be well placed against a backdrop where households are really watching their pennies and that is largely reflected in this latest trading update. The company is also generating lots of cash which it can return to shareholders.
‘There is the odd warning sign here and there though, which the market may give some attention to. In particular, the company’s inventory position has increased a touch – hinting at a potential slowdown in non-food sales.’
The group, which also works in France and has Heron Foods shops, has 707 B&M stores in the UK.
