29th Jun 2022 15:20
(Alliance News) - The ongoing cost-of-living crisis looks to have taken a hold of B&M European Value Retail SA as the discount retailer's pandemic-fuelled sales momentum waned.
The stock was up 1.3% at 384.68 pence on Wednesday afternoon but is down 33% so far this year.
The Luxembourg-based retailer said on Wednesday revenue declined in its financial first-quarter, but the variety goods retailer still left its annual guidance unchanged.
For the 13 weeks to June 25, group revenue was down 2.2% to GBP1.16 billion from GBP1.19 billion in the first quarter last year. For B&M UK, revenue was down to GBP957 million from GBP1.02 billion.
While the group had benefited from lockdowns, as it was allowed to remain open due to its classification as an essential retailer, it since has seen trading ease back.
B&M said, however, that it had seen an "improving trend" with revenue during the quarter. Further, it explained that B&M UK had exceptionally high sales in April 2021, thus distorting the comparison.
Looking ahead, B&M said there is no change to the guidance issued at its annual results in May, with financial 2023 adjusted earnings before interest, tax, depreciation, and amortisation expected to be in the range of GBP550 million to GBP600 million. Adjusted Ebitda in financial 2022 came in at GBP619 million.
AJ Bell's Russ Mould commented that as a budget retailer, B&M "should have been in its element" as the country faces a stalling economy.
Mould said: "Its cheap prices appeal to cash-strapped individuals who are watching every penny and people looking to trade down from more expensive retailers. However, a drop in sales would suggest this tailwind is not as strong as previously thought.
"The company argues that some of its sales figures were distorted by having very tough year-on-year comparative figures to beat. If you look beyond that trading period, the decline in sales hasn't been as bad in recent weeks."
B&M also said it has launched an online trial by B&M UK with 1,000 items now available for delivery to home.
"This presents an opportunity to increase sales, yet whether such a service would contribute to profits near-term is unknown. Typically, online services need to run on a large scale to make money so even if B&M moves from a trial to a national rollout, there is no guarantee the service will put cash in its pocket after paying for costs anytime soon," Mould added.
The trading update comes as Co-Founder Simon Arora is set to step down as chief executive officer, replaced by B&M's current chief financial officer, Alex Russo. Bobby Arora, the other co-founder, will remain in place.
Earlier this year, B&M warned the outlook for the business is uncertain with the impact of soaring inflation on product prices and consumer spending yet to be felt.
Arora said in May that shoppers tightening their belts could hurt sales but may also lead to a rise in new customers looking for lower-priced products.
"A [share price] fall of 40% year-to-date coming into this latest update is similar to other retailers who'd benefited from the pandemic, including the likes of Ocado and Amazon," said interactive investor's Keith Bowman.
"In all, an uncertain economic outlook and a cost-of-living crisis for consumers make for a tough backdrop. The previous loss of its chief executive of over a decade cannot be brushed aside, while costs for businesses generally are on the rise," Bowman added.
By Arvind Bhunjun; [email protected]
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