Discount retailer B&M hikes earnings outlook and declares £200m special dividend

B&M European Value Retail has lifted its annual profit forecast and announced a special dividend following a robust Christmas trading season.

The variety store chain revealed turnover grew by 12.3 per cent to £1.57billion in the three months ending Christmas Eve, against the equivalent period last year, thanks to solid performances across all divisions.

Within the group’s French business, sales surged by a quarter to £136million, while its frozen food store chain Heron Foods saw revenue growth of 22.5 per cent. 

Meanwhile, UK sales increased by 10.3 per cent to £1.3billion owing to substantial demand for grocery and general merchandise items as more Britons sought out bargains amid a worsening cost-of-living crisis. 

B&M added that ‘excellent’ sell-through in certain ranges from the latter category helped boost its gross margins, which have been impacted over the past year by price cuts on gardening products aimed at removing surplus stock.

The FTSE 100 retailer now expects to post adjusted core earnings of between £560million and £580million this financial year, compared to analysts’ current estimates of £557million. 

It also intends to hand shareholders a 20p per share dividend early next month, amounting to approximately £200million in total value.

Chief executive Alex Russo hailed the company’s healthy performance during the ‘Golden Quarter,’ which he said reflected ‘the strength of our unchanged strategy to relentlessly focus on price, product and excellence in retail execution.’

He added that even in the context of harsher economic conditions B&M ‘will continue to work hard to help both existing and new customers manage the cost-of-living crisis.’

Headquartered in Liverpool, B&M sells a wide variety of discounted goods, ranging from gardening equipment to furniture, clothing and electricals, across over 1,100 stores in the UK and France.

Sales boomed in the first year of the Covid-19 pandemic, skyrocketing by £1billion as its British outlets benefited from remaining open throughout the whole period and high demand for DIY products.

Trading has slowed down significantly since lockdown restrictions started to be loosened, but analysts have predicted the present inflationary backdrop might encourage more customers to search for a good deal at one of the firm’s stores. 

Russ Mould, investment director at AJ Bell, said: ‘B&M appeals to people who want to trade down from more expensive retailers, showing that the value proposition from a pricing perspective is a winning model in the current environment. 

‘Importantly, it talks about improved gross margins and more efficient supply chains, two areas which have been problematic for the retail sector in the past year.’

B&M European Value Retail shares were up by 0.5 per cent at 447.4p just before trading closed on Thursday, although their value has declined by around 29 per cent in the past 12 months.