B&M shares sank on Tuesday after the retailer said sales growth was slowing and revealed its ‘Back to B&M Basics’ plan to improve operations.
B&M shares fell 15% after the discount retailer B&M unveiled a comprehensive operational overhaul following the reporting of weaker-than-expected sales growth and a significant decline in profits during the first half of its financial year.
The company’s Group revenue grew 4.0% to £2.74 billion in H1 FY26, but this masked underlying challenges. B&M UK’s like-for-like sales managed only 0.1% growth in the first half, declining 1.1% in the second quarter alone.
Back to B&M Basics Initiative
Management has identified key operational weaknesses and launched the “Back to B&M Basics” programme to address them. The initiative focuses on four critical areas that have impacted recent performance.
The company has reduced prices on 35% of its Key Value Items, lowering the average prices by 1.8% to target customer price perception. B&M’s low-cost options will be all-important as UK job creation slows.
B&M is also rebooting its “Managers Specials” promotions, giving store managers more flexibility to select products that respond to local opportunities. The revamped approach launched with Back-to-School and Halloween ranges, both showing positive early results.
Operational challenges addressed
Product availability has emerged as a significant issue and B&M found that FMCG best seller availability across key stores stood at just 86%, well below the industry benchmark of 98%. This will be a concern for investors who rely on management to get low-cost products to customers in an orderly fashion.
Range simplification will also be looked at. B&M plans to reduce line counts and accelerate clearance of discontinued ranges, particularly in FMCG, home accessories and toys, following a material increase in product complexity in recent years.
Investors will hope that, over time, these measures pay off.
Financial Impact and Outlook
The operational challenges have taken a financial toll. Group adjusted EBITDA is expected to fall to approximately £198 million in H1 FY26, down from £274 million in the previous year.
Additional headwinds include £14 million in Extended Producer Responsibility tax costs, adverse foreign exchange movements of £3 million, and around £30 million in higher wage costs from minimum wage and National Insurance increases.
For the full year, B&M expects Group adjusted EBITDA of £510-560 million. The company’s leverage ratio will temporarily exceed its 1.0-1.5x target range due to lower earnings and seasonal working capital requirements.
B&M anticipates the full impact of its turnaround programme will take 12-18 months to materialise. With shares down 36% year-to-date, it can’t come soon enough.