- UK organic sales disappoint
- Margin pressure in non-food
- New CEO has his work cut out
Warmer weather and soft comparatives helped embattled shopkeeper B&M (BME) return to like-for-like growth in its core UK business in the first quarter to 28 June 2025.
Unfortunately, this growth came in at the lower end of market expectations and the variety goods discounter warned of lower margins in some general merchandise categories, raising fears of a potential margin reset and sending B&M’s shares down 7.3% to a two-year low of 238.9p.
With consumers counting the pennies, business should be booming at B&M, so the market is clearly losing patience with the retailer’s ability to deliver meaningful like-for-like growth and new chief executive Tjeerd Jegen has his work cut out in turning the company around.
SOFT FIRST QUARTER
Group revenue rose 4.4% in the first quarter driven by growth from new space and positive quarterly like-for-like performances in both the B&M UK and B&M France chains.
While UK like-for-like sales rose 1.3%, improving from a 1.8% decline in the fourth quarter, this was shy of the 2% to 3% increase analysts were expecting.
B&M’s statement noted negative like-for-like sales in FMCG (fast moving consumer goods), where further work to ‘strengthen the proposition’ continues, while the retailer warned ASP (average selling price) deflation had led to ‘a lower trading gross margin year-on-year in some general merchandise categories’.
TIME FOR A RESET?
Dan Coatsworth, investment analyst at AJ Bell, said B&M’s latest update was not a bad way for Jegen to kick off his tenure, with sales up at a headline level and on a like-for-like basis.
However, ‘the like-for-like increase was only modest, and at least some of this could be attributed to the timing of Easter,’ explained Coatsworth. ‘This annual catalyst for getting shoppers through the tills fell in the first quarter this year but not last. There was also a concerning like-for-like decline in B&M’s fast moving consumer goods grocery channel and it faces continuing pressure on margins, particularly in its general merchandise category.’
Coatsworth continued: ‘There was no updated guidance for the full year - investors will have to wait until first-half results in November for that information - but the tenor of this announcement raises the prospect of Jegen seeking to reset expectations to provide him with the room to turn things around for the business.
‘Achieving some genuine sales momentum is probably top of the market’s wish list and today’s update is a reminder that it will take time to fix the problems which led to the departure of Jegen’s predecessor, Alex Russo.’
Panmure Liberum maintained its ‘buy’ rating on B&M, yet conceded the first quarter showing was ‘somewhat disappointing and does little to ease fundamental concerns around the health of the FMCG grocery channel.’
The broker warned ‘fears of a potential margin reset may persist, keeping earnings volatility elevated’ and suggested like-for-like sales would ‘struggle to maintain momentum for the remainder of the year.’
Jefferies, which has a ‘hold’ rating on the stock, described the results as ‘a soft outturn from B&M, particularly given the weak comps, Easter boost, and favourable weather - even if we had broadly inferred this following the full-year results in early June. We remain poised to see the CEO’s diagnosis and treatment of B&M’s weak like-for-like trend.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
