B&M European Value shares were lower on Wednesday after the discount retailer announced preliminary results that highlighted the impact of increased competition and rising finance costs.

Although group revenue increased 3.7%, the higher sales were a result of new store openings as opposed to shoppers boosting their spend. B&M UK like-for-like sales dropped 3.1%.

This will be a concern for B&M investors given that the discounter relies heavily on volume and the company says its long term growth strategy is based around like-for-like growth in the UK. 

B&M pointed to disappointing FMCG sales and the timing of Easter as a key factor behind falling sales.

The company relies heavily on lower-income groups to support sales, and this customer base, unfortunately, is feeling the hit from the cost-of-living crisis the most. 

Group profit before tax fell 13% to £431m as higher interest and finance costs weighed on profitability.

B&M shares were down 6% at the time of writing. 

Adam Vettese, market analyst for eToro, summarises the issues facing B&M perfectly:

“B&M is continuing to feel the pressure of the tougher consumer environment, as profits have dipped by a little over 13%, accompanied by a negative like-for-like sales trend of -3.6%. B&M offers consumers familiar brands at low prices but now also face stiff competition from other discounters, with multiple retailers competing hard for less disposable income out there under current macroeconomic conditions. 

“The company can show revenue numbers which are growing, but this is coming primarily from stores that have just opened, which will get that initial surge in sales as shoppers flock to see what’s new in their area. This in itself can be papering over the cracks of the wider issues of margins, and profit coming under more pressure. 

“Shares have been on a downward trajectory since the beginning of last year and are worth a little over half of what they were then. B&M may need to see consistency come back into their store network as a whole to convince investors of a turn around.”

The FTSE 100 dipped in early trade on Tuesday with traders choosing not to push the index above the 8,800 level amid concerns around China’s economy, global growth and the ongoing trade tensions.

London’s leading index was up 0.1% at the time of writing, having recovered early losses.

“European equity markets struggled to find direction early on Tuesday, with investors still showing signs of nervousness around tariffs and the economic outlook,” said Russ Mould, investment director at AJ Bell.

The FTSE 100 succumbed to selling across the natural resources sectors with the US/China spat rumbling on and poor Chinese economic data weighing on markets.

Names such as Rio Tinto, Anglo American, and Glencore were among those that were most heavily hit on Tuesday.

China’s manufacturing sector is showing signs of slowing, with PMIs dropping as a result of US tariffs. This isn’t good news for metals demand dynamics. 

We’re starting to see the first signs of poor economic data resulting from Trump’s tariffs, and slowing economies due to US trade policy will likely be the next big test for equities after a rip-roaring rally from recent lows.

“The OECD has downgraded its forecast for global economic growth as the effects of the trade war start to be felt. It’s only a small revision – from 3.1% to 2.9% for 2025 – but it’s still enough to cause investors some digestion as they consume their morning news. The downgrade weighed on the mining sector as the market fears it could mean reduced demand for commodities, and therefore a potential knock to the price of metals and minerals,” Russ Mould explained.

“The 90-day pause on tariffs has just over a month before expiration, meaning the pressure is on countries to do deals with the Trump administration. Reports suggest that Trump wants best offers on trade negotiations by Wednesday, perhaps to avoid any last-minute rush or stalemate situations.”

Trump’s actions have aptly led to the coining of the term ‘TACO’ ( Trump Always Chickens Out) among traders for his hesitancy to follow through on tariffs, but it’s the uncertainty for businesses around potential tariffs that is leading to economic disruption.

Although the index turned positive, there was a risk-off tone to trade with the FTSE 100 being supported by more defensive safe haven names such as Centrica, BAE Systems, and Fresnillo.

Babcock was still feeling the benefits of the government decision to upgrade its nuclear submarine fleet. Shares rose 2%.

Pennon shares slipped on Tuesday after the water supplier revealed the impact of higher costs after parasites were found in Devon’s water supply and rebased its dividend following a £490m rights issue.

The group swung to a loss despite revenues increasing 15%, as non-underlying costs of £37.6m related to restructuring and the breakout of parasite cryptosporidium in Devon wiped out any profits for the group.

Pennon shares were down 2% at the time of writing.

Although the group recorded a loss in the last year, there are some reasons to be optimistic. The company will benefit from higher water bills that promise to help support Pennon’s ambitious, yet overdue, upgrade of its water systems.

“Pennon managed to keep revenue streaming in last year, with the acquisition of SES Water helping the full-year total float 15% higher to £1.0bn. And with Pennon accepting the regulators’ price review, customers’ bills look set to continue growing. Markets are currently forecasting this year’s total to buoy to a new high-water mark of £1.2bn, up a further 14%,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“The top line growth should help to fund Pennon’s mammoth investment plans, with the group required to spend £3.2bn fixing and upgrading its water networks over the five years to March 2030. Pennon’s made good early progress in this area, with record levels of capital expenditure last year as public scrutiny on the sector has been mounting due to pollution of rivers and lakes. While it was pleasing to see early progress on this front, with the overall number of pollution incidents falling year on year, the increased investment weighed on profitability last year.”

Water companies aren’t the most exciting companies at the best of times, and the increased regulatory pressures and requirements to upgrade the systems make the sector just a little less attractive.

In addition, Pennon has created problems for itself with the parasite problem, and analysts highlight the difficulties the group is having shaking this off.

“The Brixham water incident, which involved parasites being found in the Devon water supply have hit the firm reputationally and may well still see further repercussions down the line as a result. Add to that a dividend cut and the investment case sees more risks appearing for less reward. High debt, regulatory scrutiny, and reduced income will temper enthusiasm, and this is evident when looking at the trajectory of shares,” said Adam Vettese, market analyst at eToro.

Pennon cut its dividend to 31.57p from 36.67p during the year due to a rebase of the payout following a rights issue.

The FTSE 100 was trading broadly flat on Monday as Babcock led a recovery following a soft start to the week.

London’s leading index is trading up 7 points at the time of writing after falling as much as 30 points in early trade. Donald Trump’s erratic approach to trade policies was again the main detractor from investor sentiment, but strength in the defence sector helped steady the ship after the UK government outlined plans to boost defence spending.

“Donald Trump has upset markets once again,” said Russ Mould, investment director at AJ Bell. 

“Doubling import taxes on steel and aluminium, and aggravating China once again, mean we face a situation where uncertainty prevails. Trump’s continuous moving of the goal posts is frustrating for businesses, governments, consumers and investors.”

However, markets are approaching a stalemate with Donald Trump’s trade policies, with the threat they pose not going away, but doubts they will ever be enacted offsetting concerns about their potential impact on the global economy.

“We’re back in a situation of one step forward, two steps back, but there do appear to be expectations that more concessions will be struck,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Investors are getting used to aggressive statements being rolled back, so much so the TACO trade theory has rippled through Wall Street, which stands for ‘Trump Always Chickens Out’. But there’s no guarantee that the US President won’t follow through with more onerous restrictions, given he’s stayed steadfast to his pledge to bring more manufacturing back to the US.”

Beyond Trump’s latest volley of threats, investors in defence stocks welcomed the UK government’s commitment to increasing defence spending to 2.5% of GDP in the near term.

“The defence sector was in demand ahead of the UK government setting out its plans to protect the country and support allies. Babcock, BAE Systems and Rolls-Royce were among the stocks in positive territory as investors targeted an industry with a clear earnings tailwind,” Russ Mould explained.

Babcock was the top riser as traders positioned for a boost in spending on its submarines. Babcock currently supports the UK’s entire nuclear submarine fleet, accounting for more than a third of the group’s total revenue.

Anglo American was the top faller after announcing the demerger of Valterra. Anglo American shares were down 11% in London.