Discount retailer B&M European Value Retail (LON: BME) has grown its like-for-like sales by more than 30% during November. It is waiving business rate relief from the government.
There will be £80m waived and this will hit forecasts. However, that strong trading has enabled a £60m uplift in expectations. That means that the net effect is a £20m plus reduction in forecast pre-tax profit for this year. The forecast has fallen to £447m with earnings of 35.8p a share, falling by a lower percentage.
First half like-for-like growth in sales was 23% and this growth has accelerated. The fact that the government says it is an essential retailer and has not had to close is helping B&M to win market share. Management is cautious about the rest of the year and does expect a slowing in the rate of growth. The chain appears to be attracting new customers.
B&M is keen that high street and online retailers are treated equally in terms of taxation.
The strong trading means that there are upgrades for the next two years. A small decline in pre-tax profit is still expected for next year as trading and competition is expected to get back to a more normal situation. Next year’s pre-tax profit forecast has been raised by £30m to £430m. The total dividend is expected to be 11p a share.
At 473.4p, the shares are trading on less than 14 times prospective 2021-22 earnings. That still appears fairly low considering the underlying trend of profit – the 2019-20 figure was £243m and the strong cash generation.