- EBITDA at top end of guidance
- Profits above Covid-era peak
- But guidance absence spooks investors
Cash-generative discounter B&M European Value Retail’s (BME) annual results came in towards the top end of the guided range, while management reiterated the growth opportunity from the FTSE 100 retailer’s store opening programme.
Why then, did shares in the affordable general merchandise seller sink 5.6% to 515.6p on the news?
The answer appears to be the absence of current trading numbers or full year 2025 profit guidance in what Shore Capital described as a ‘very backward looking update’ that was light on trading disclosure.
B&M’s only notable references to expectations were that ‘like-for-like sales are expected to contribute to total volume growth going forward, as they always have’, and it remains ‘confident in our outlook for cash generation and profit growth’.
EARNINGS ABOVE COVID PEAK
One of Shares’ key picks for 2024, the discount chain’s adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) grew 9.7% to £629 million in the year to 30 March 2024.
Encouragingly, that was at the top end of management’s £620 million to £630 million guidance and above the £626 million Covid-era peak with the variety goods seller’s laser focus on low prices luring in cost-conscious shoppers. Total sales ticked up 10.1% to £5.5 billion, reflecting robust growth at the core B&M UK chain and double-digit growth in B&M France and convenience stores chain Heron Foods.
While B&M said all its fascia delivered ‘volume growth through both positive like-for-like customer transaction numbers and new space growth’, Shore Capital was left confused as to whether same-store volume growth actually emerged.
B&M said it plans to open at least 45 new UK stores this year as part of its target to reach ‘not less than’ 1,200 B&M UK locations nationwide, but Shore Capital said it worries about ‘the over-expansion of the B&M network in the UK’, albeit seeing scope ‘for much growth with a careful roll-out in France’.
WHY LIBERUM REMAINS BULLISH
With a ‘buy’ rating and 685p target price on B&M, Liberum Capital insisted: ‘This is a very strong outturn, which contrasts very positively to much of the reporting we are seeing across the rest of the sector. The predictability of B&M’s model is driven by market share gains from a ‘cookie-cutter’ store roll-out (this is not an LFL story) and its disruptive, value-focused offer. Today’s update ticks all the right boxes, giving us confidence in the runway for long-term.’
Lukewarm on B&M with a ‘hold’ rating, Jefferies commented: ‘A robust full year 2024 result from B&M, albeit very much as expected. The most notable element, in our view, is the lack of outlook and full year 2025 commentary, even if consensus appears to have already anticipated a weak first quarter outturn.’
