General merchandise discounter B&M European Value Retail (BME) reported strong sales for the third quarter including Christmas, the designated ‘essential retailer’ continuing its impressive performance since the start of the pandemic.
The cut-price variety goods seller narrowed guidance for the year to March 2021 to adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) on a pre-IFRS 16 basis of £540 million-to-£570 million, an upgrade of around 2% at the midpoint after the voluntary repayment of £80 million of business rates relief.
Adding to the good news was the announcement of a third special dividend since March, though the shares were 3p easier at 527p on profit-taking following a strong run that resulted in B&M’s promotion to the FTSE 100 last year.
STRONG ‘GOLDEN QUARTER’
For the ‘golden’ third quarter to 26 December 2020, B&M’s UK stores generated like-for-like sales growth of 21.1%, while its value convenience store chain Heron Foods delivered another quarter of ‘solid’ like-for-like growth.
Third quarter sales in the French operations Babou and B&M France decreased by 1.4% due to a four week lockdown across the Channel that ended on 28 November, though sales performance proved strong when stores were allowed to open.
ANOTHER SPECIAL DIVIDEND
Investors were also treated to the news B&M will pay a special dividend of 20p per share on 29 January, its third since March 2020, totaling around £600 million.
These payouts reflect B&M’s strong trading and cash flow generation throughout the pandemic as well as the balance sheet health that will enable the retailer to execute on a ‘healthy’ new store pipeline.
‘Notwithstanding our status as an essential retailer, with lockdown restrictions in the UK having tightened there remain uncertainties ahead,’ conceded chief executive Simon Arora.
‘With our combination of exceptional value and convenient out of town locations, we are confident that our business model will prove highly relevant to the needs of customers in 2021.’
THE LIBERUM VIEW
Reiterating its ‘buy’ rating on the shares, Liberum Capital commented: ‘Today’s update again demonstrates the strength of the group’s discount, general merchandise offer and predominantly retail park sites, which leave it primed to benefit during further lockdowns, as well as being a long-term structural winner.
‘Our latest pricing survey shows B&M is maintaining its much cheaper core grocery offer versus the supermarkets, which is driving significant new customer acquisition, while maintaining margin strength and delivering broad category growth. Free cash flow generation has accelerated and should give headroom for more special dividends’, added the broker.
