B&M shares fell 6.9% to 427p in early morning trading on Tuesday, after the discount retailer announced a slate of declining results across the board, with a 2.7% drop in total group revenues to £4.6 billion in FY 20222 from £4.8 billion in FY 2021.
B&M pointed out its 9% decline in like-for-like sales as a primary driver in its revenue fall, and reported a 1.2% EBITDA slide to £619 million compared to £626 million the last year.
The discount group mentioned a 0.1% dip in statutory pre-tax profit to £525 million from £525 million, alongside a 3% fall to £524 million compared to £540 million in FY 2021.
The firm highlighted a £790 million debt at the close of 2022, with a net debt to adjusted EBITDA leverage ratio of 1.3 times, compared to 0.8 times at the end of 2021, remaining within its 2.25 times leverage ceiling.
The company noted a statutory diluted EPS slide of 1.4% to 41.6p against 43.4p and an adjusted diluted EPS drop of 4.2% to 41.6p from 43.4p.
B&M reported an ordinary dividend reduction of 4.6% to 16.5p compared to 17.3p year-on-year.
The retail firm commented that its 34 gross B&M UK store openings were offset by 14 closures and relocations, however its new store returns reportedly remained strong.
The group also confirmed the appointment of CEO Simon Arora’s replacement, former CFO Alex Russo, following Arora’s announcement that he would be stepping down from the position earlier this year.
“I am very pleased with the results we have delivered. The strength and resilience of our business model has enabled us to execute our plans well and continue offering compelling value for money to customers,” said B&M departing CEO Simon Arora.
“As a result, we have sustained the step up in sales and profit compared to pre-pandemic levels.”
“To all colleagues across the Group who helped make that happen, I extend my sincere thanks.”
B&M UK
B&M UK saw an uptick of 2.9% in stores, with 701 stores operational at the end of 2022 against 681 stores in 2021.
UK location revenues fell 4.1% to £3.9 billion compared to £4 billion, with an adjusted EBITDA fall of 4.5% to £564 million from £591 million.
Heron Foods
Heron Foods stores increased 1.6% to 311 outlets compared to 306 over the course of the financial year.
The franchise confirmed a revenue dip of 0.9% to £411 million from £415 million, along with an adjusted EBITDA tumble of 8.1% to £23 million against £25 million over the year.
France
B&M rolled out three new stores openings in France, with a 2.9% growth to 107 locations from 104 the year before.
Revenues in the group’s French stores grew 14.2% to £353 million against £309 million year-on-year, alongside an adjusted EBITDA spike of 191.6% to £32 million from £11 million.
Outlook
The franchise commented that rising inflation looked set to drive customers to discount offerings, however the company warned that trading patterns remained unpredictable, especially for the elasticity between volume and price on general merchandise, and consumer demand at the individual category level.
The group confirmed B&M UK like-for-like sales decreases of 13.2% against FY 2022 rates and 11.5% from FY 2021 over the initial eight weeks of FY 2023.
“Despite a tough trading landscape, discounter B&M is likely to benefit from the cost of living squeeze as shoppers trade down,” said Third Bridge analyst Ross Hindle.
“Our experts believe B&M has the ability to pass on inflation costs to its customers without compromising on its price gaps with key competitors. It will also consider other creative alternatives such as re-engineering certain products and shrinkflation.”
The group reported an estimated adjusted EBITDA in the range of £550 million to £600 million across the coming year.
“Considering operating cost headwinds and mix changes, our experts expect EBITDA levels to decline towards -12.5% for the upcoming trading year,” said Hindle.
However, Heron Foods showed a positive outlook on the back of rising food inflation and a return to regular footfall levels, with French stores delivering strong growth after strong performance the year before.
B&M confirmed an expected 40 B&M UK store openings, 15 Heron Foods outlets and six new locations in France over FY 2023.
The company announced that it expected to roll out at least 950 B&M UK outlets over the long term, with expansions plotted for Heron Foods and B&M France, as a result of a projected rise in organic growth from FY 2024.
“The retail industry is facing inflationary pressures whilst our customers are having to cope with a significant increase in the cost of living, making spending behaviour in the year ahead difficult to predict,” said Arora.
“However, we have seen before that during such times customers will increasingly seek out value for money, and B&M is ideally placed to serve those needs.”
“As such, we are well positioned to support the communities in which we trade and continue our long-term growth strategy.”