Shares in B&M European Value Retail (BME) were the biggest FTSE 100 fallers on Friday, plunging 7% to 511.6p on the news long-serving boss Simon Arora plans to retire in 12 months’ time from his role as CEO and a director of the company.

Also weighing on sentiment towards the stock was a negative read-across from today’s downbeat ONS retail sales figures for March.

These showed volumes and values tumbled for a second consecutive month as consumers reined in retail spend with the rising cost of living continuing to bite.

BOSS TO BOW OUT

Investors were unnerved by the news Arora, who has led B&M for over 17 years and made it one of the biggest modern success stories in UK retail, is to bow out.

He acquired the retailer alongside brother Bobby Arora when it was a regional chain of only 21 stores in late 2004.

Since then, it has grown into a retail giant with over 1,100 stores across the UK and France and having floated in 2014, is now a constituent of the FTSE 100.

Bobby Arora, group trading director, intends to remain with the business in his current role.

B&M stressed that over the coming year, Simon Arora will ‘remain fully committed to the business’ in his role as CEO, ‘in particular to assist in a smooth transition to his successor’.

A succession process, led by chairman Peter Bamford, will consider internal and external candidates and a further announcement will be made ‘when appropriate’.

‘It has been a privilege to lead B&M for 17 years and I am immensely proud of the incredible journey that we have been on,’ commented Arora.

‘B&M’s value for money proposition remains as relevant and compelling to shoppers today as it has ever been,’ he added.

THE EXPERT’S VIEW

As Shares has explained, the variety goods retailer’s value proposition should leave it well positioned for inflationary times.

As household bills rise, our view is the groceries-to-general merchandise seller should benefit from cash-strapped consumers trading down.

However Russ Mould, investment director at AJ Bell, pointed out shares in B&M are actually down significantly year to date.

‘One might have thought cash-strapped consumers looking to save money would trade down to cheaper items which would benefit value retailer B&M, but the stock market clearly disagrees,’ said Mould.

‘So, is chief executive Simon Arora getting out before everything turns ugly? News that he will leave the business in 12 months’ time is perhaps not a complete surprise given his family investment vehicle SSA sold £234 million worth of shares in B&M three months ago. That was a signal that Arora was thinking about the future and one that perhaps was less hands-on than his current role.’

The share price decline on news of his forthcoming departure ‘goes to show that the market doesn’t want him to go, although one must also factor in the latest retail sales figures as weighing further on the share price,’ said Mould.

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.

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Issue Date: 22 Apr 2022