Retail

Discounter B&M knocked by sluggish UK sales growth


Shares in variety discounter B&M fell 9 per cent in early trade after the rapidly-expanding group reported disappointing same-store sales in its core UK market.

UK revenue grew 8.8 per cent in the quarter to December 28, but this was largely driven by 15 new store openings. Same-store sales were up just 0.3 per cent.

The company cited a “challenging broader retail market and our decision not to engage in any early discounting activity” for the sluggish performance. 

There was also no update on the strategic review of Jawoll, its German operation where performance has been weak lately. Sales there were down 1.5 per cent in the quarter, at constant exchange rates.

Babou, the French operation acquired last year, generated sales of £85m. 

Simon Arora, chief executive, said that costs were well controlled and inventory levels were in line with previous seasons. He added that this year’s new store openings as a whole had performed better than expectations. 

Richard Chamberlain, an analyst at RBC, said the company was likely to have suffered from the same softness in the toy market referenced by J Sainsbury earlier in the week; the supermarket’s Argos subsidiary is the UK’s biggest toy retailer. He had been expecting growth of 2.5 per cent in UK sales.

“B&M is a space driven model but the market is likely to be concerned about the like-for-like run rate, particularly as comparisons become tougher in the fourth quarter,” he said in a note to clients.

However, he added that the company still offered relatively unique exposure to a sector where most of the other operators — such as Home Bargains, Matalan, Wilko and Poundland — are privately owned.

Variety discounters typically offer a narrow range of products in key categories such as toys, stationery, personal care and DIY. They rely on large volumes and competitive sourcing to offset the low selling prices.

“The sale and leaseback of B&M’s Bedford warehouse should also provide scope for higher cash returns at the end of the financial year,” he said.



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