- Russo to retire at end of April
- Earnings guidance lowered again
- Like-for-like declines ‘at the core’ of challenges
B&M European Value Retail’s (BME) stock plunged 8% to a five-year low of 268p after the struggling discounter delivered another profit warning and announced that Alex Russo will retire as CEO at the end of April.
Russo appears to have carried the can for the variety retailer’s latest earnings downgrade, one pinned on weak current trading, an ‘uncertain economic outlook’ and the potential impact of currency volatility on the valuation of its stock and creditor balances.
TIME TO SAY GOODBYE
Panmure Liberum said Russo’s retirement and B&M’s latest profit downgrade are ‘unlikely to be mutually exclusive events’ given the retailer’s performance has been ‘disappointing for the past year’, during which the shares have underperformed the FTSE All Share by more than 40%.
Russo was meant to have steered the discount retailer to greater things since becoming CEO in September 2022, but the market has lost faith in the business amid a slowdown in growth over multiple consecutive quarters.
Someone had to take the blame and it’s inevitable that the CEO falls on their sword. While Russo’s exit is framed as retirement, the lack of a successor and a mere two-month lead time until departure imply a different story.
B&M said it is ‘in the advanced stages’ of a recruitment process to appoint a new CEO with the support of a leading executive search firm and an update will be provided ‘in due course’.
As for Russo, he insisted he has ‘thoroughly enjoyed’ his time at B&M since joining in 2020.
‘The business has been successfully steered through the pandemic years and is now larger and stronger with group revenues increasing by almost 50% and cash distributions to shareholders in excess of £2 billion during my tenure. It has been professionally rewarding to assemble and work with a high quality leadership team and to retire leaving growing businesses with great potential in both UK and France.’
LACKLUSTRE LIKE-FOR-LIKES
In its brief statement, B&M warned full-year 2025 adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is now expected to be in the £605 million to £625 million range.
That’s down from the £620 million to £650 million guidance given with its Christmas update on 9 January and the £620 million to £660 million range provided at the half-year results on 14 November.
As a value retailer, B&M should have been hoovering up new customers left, right and centre as they trade down from more expensive shops, but consumers continue to feel the strain of higher interest rates and they’re watching every penny.
Shore Capital analyst David Hughes explained that like-for-like declines are ‘at the core’ of the FTSE 250 retailer’s challenges. On 9 January, B&M issued a weak third quarter update showing a third consecutive quarter of like-for-like sales decline, despite easier comparatives over Christmas 2024.
‘With the grocery market remaining highly price competitive (see the recent re-launch of Asda’s rollback scheme and Tesco (TSCO) and Sainsbury’s (SBRY) successful loyalty price schemes) we expect it to remain a challenging market for B&M to maintain its price differential while returning to like-for-like growth,’ warned Hughes.
Jefferies observed that B&M’s disappointing update ‘must infer that the improved December/January like-for-like trend that was repeatedly highlighted last month has not been sustained. The change in CEO will be of limited surprise, in our view, given the group’s consistent over-promising on profit delivery and an like-for-like trend that was both weak and unexplained.’
