- Group revenues fall due to tough comparison
- Company sticks to its full year outlook
- Analysts say the update could have been worse
Shares in variety goods value retailer B&M European Value (BME) edged up 2.5% to 389p after a first quarter trading update which analysts at one leading broker described as ‘slightly better than feared’.
Although sales dipped slightly on a like-for-like basis compared with the same period last year, the firm said it saw an improving trend during the quarter and kept its full-year earnings target.
TOUGH COMPARISON
Comparing sales for the three months to the end of June with the same quarter of 2021 was always going to be tough given the exceptionally strong spike in activity last year as the country emerged from lockdown.
Nevertheless, group revenues were only down 2.2% on the same three months of last year and during May and June the decline was only 1.6%.
The core UK B&M business posted a 9.1% decline in like-for-like sales, but Heron Foods showed a 10% increase, which was ahead of expectations.
The French business Babou, although still relatively small, increased sales by more than a third with gardening and leisure products performing particularly well.
On a two-year basis, which provides a better comparison given that B&M stores were allowed to stay open during the initial lockdown period, group sales were slightly ahead.
GUIDANCE MAINTAINED
Significantly, the firm said there was no change to the forecast it gave at the end of May, with group adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) for the full year seen in a range of £550 million to £600 million.
For comparison, EBITDA for the year to the end of March 2022 was £619 million, 80% higher than two years earlier which again presents a tough comparison.
Analysts Eleonora Dani and Darren Shirley at Shore Capital kept their hold rating on the stock and their 380p price target following the update.
‘B&M remains a well-managed company with sound cash generation and tight cost control’, they noted.
‘However, while slightly better than feared, today’s statement might not be enough to move our estimates or consensus (both already at the lower end of the guided range) as we remain concerned about inventory levels and loss of price food leadership’, they added.
‘We see challenges ahead due to the cost of living squeeze, particularly for B&M’s lower-income customers.’
