Shares in B&M European Value Retail (BME) cheapened 7.7% to 349p on Tuesday after the variety goods value retailer’s first half results came in shy of expectations due to poor trading in its German chain, Jawoll.

The German business has been placed under review, while a flat half-time dividend of 2.7p from the cash-generative B&M may appear grudging to some income-hungry investors.


B&M’s results for the half to 29 September revealed adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of £139m, up 5.7% year-on-year but below the £147m called for by consensus.

Profit before tax tumbled 70.5% to £32.2m after a gigantic £59.5m Jawoll-related impairment charge.

Jawoll has proved a major disappointment for B&M, lurching into losses amid distribution issues and weak sales in the period. Accordingly, management has decided to conduct a strategic review of Jawoll to determine the future of the business.

On the plus side internationally, acquired French chain Babou posted a slight profit, although it remains a small part of the overall business.


Troubles in Europe’s largest economy will hog the headlines today, but B&M’s core domestic business is in rude health. UK like-for-like sales grew by 3.7% in the half, buoyed by strong growth in homewares and indoor furniture. Total revenue rose 13.8%, driven by new store openings and the resonance of the B&M brand, a play on value and convenience trends, with price-conscious shoppers.

Reassuringly, third quarter trading to date has seen ‘continued solid like-for-like sales growth’ in the B&M UK stores business, well placed for the so-called ‘golden quarter’ including Black Friday and Christmas.


And as chief executive Simon Arora explained: ‘Despite the continued uncertainty in the economic environment generally, we are very proud to say that each of the top five store opening days in our history have all been in stores we have opened in the last 12 months.’


Liberum Capital is keeping the faith with B&M, which it believes is set up nicely ahead of the festive selling season and could cope with a ‘no deal’ Brexit, since its offer ‘contains no material fresh or chilled (shorter-lead time) product versus the supermarkets’ and ‘90% of the group’s imported goods for peak trading were due to be in the UK by the end of October leaving it well-placed heading into November and December.’

However Russ Mould, investment director at AJ Bell, said: ‘German operations aren’t going as planned with this part of the company now under strategic review. It goes to show that having a low price point does not equate to guaranteed earnings success.

‘B&M seems to have made a mess of its German business called Jawoll. It looks like poor management decisions with product availability issues, late arrival to stores of seasonal stock and huge markdowns to clear old stock. There have also been large costs incurred on third party warehousing and logistics.

‘This looks like a business which has taken its eye off the ball and today’s sharp share price decline is investors’ way of expressing dismay with the performance.

‘B&M has another overseas operation in France which it acquired a year ago. Investors will hope that B&M doesn’t also mess things up with these operations like it has done with Jawoll.’

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Issue Date: 12 Nov 2019