Analysis: Why B&M has made a French connection with Babou deal

The value retailer snapped up Babou for €91.2m (£80.6m) last week in a bid to expand its international footprint.

The chain currently has 576 B&M stores in the UK and 86 Jawoll shops in Germany, as well as a further 265 Heron Food branches. But the business has always had lofty bricks-and-mortar ambitions, whether that is to increase its B&M footprint to 950 stores or for further European expansion.

The latest deal adds a further 95 stores to its estate – but why was Babou the right fit?

Buying tour de force

B&M chief executive Simon Arora tells Retail Week that the size of Babou’s stores, which are 27,000 sq ft on average and nearly half as big again as the average B&M store, provided a “compelling platform” for the retailer to introduce its range to French shoppers.

“For us there’s a clear synergy opportunity to apply our buying power to businesses operating the same product arena but in a different market,” he says.

The retailer’s full-year revenue for its current financial year is on track to hit £3.3bn, Arora says, which “translates to very deep volumes” of its product lines from its Far East and European suppliers.

In order to keep B&M’s light SKU count and rapid turnover of product in store, selling from more locations is essential, so Arora explains that “bringing the advantages of that buying power and providing them to an existing French business that has the stores but doesn’t have the offer that we have” makes sense.

Babou was founded in 1978 and sells value products across a variety of categories, but with a heavy skew towards clothing. The business was bought from its founding family following what Arora describes as a “three-year courtship.”

In French hands

To assure Babou’s former owners that the chain is in safe hands, B&M has drafted in a French retail veteran to run its latest acquisition.

Cedric Mahieu will be chief executive of Babou. He has previously worked as trading director for French discount chain Four Fouille and at Auchan, where he oversaw the chain’s China sourcing.

As well as having strong background in the French value retail sector, Mahieu has spent 10 months at B&M to get to grips with how the business operates.

Arora says Mahieu was “specifically recruited in anticipation of this transaction”.

“The French consumer loves a bargain just as much as the British one”

Simon Arora

He will be the helm of a sizeable opportunity, as Arora is confident that the value-focused consumer in France is currently underserved.

“The French consumer loves a bargain just as much as the British one, and the level of unemployment in the country currently stands at 9%, which is higher than here,” says Arora.

“Aldi and Lidl have demonstrated the appeal for grocery discounting in France but we think there is a real opportunity for general merchandise there which we want to seize.”

B&M will keep the Babou fascia in France, as it has with Jawoll in Germany, but its product range will be gradually reduced from its current focus on clothing in favour of homewares and seasonal goods.

When asked what fundamental changes would be made to Babou’s current offer, Arora says: “The key difference will be that [B&M] will pick a more limited range and try to avoid duplication but offer much sharper pricing.

“We find that by concentrating our volumes on a lower number of SKUs you are able to deliver much better prices to the consumer because you pass on the savings.”

Arora has always made it clear that he has his eyes firmly set on European expansion – so could Babou be the latest in a line of courtships by B&M?

For the time being, Arora is satisfied with his bounty.

“We are now in three markets and I’m happy with that – but Germany, the UK and France are the three largest consumer markets in Europe so there’s a reason those are the ones we’ve ended up in,” he says.