B&M first-quarter performance slows: What the analysts say

“Undoubtedly, challenges remain in B&M’s ongoing quest to increase its share of the blossoming value sector. For one, it is a sector that is becoming increasingly crowded and competitive, with the likes of Home Bargains, single price retailers and discount grocers, all keen to muscle in on the spoils.  

“With competition increasingly rife, B&M must continue to emphasise its points of difference to continue to win spend.

“The logistical challenge of managing such a rapid plan of expansion has also taken its toll on B&M.

“The disjunction between stock management and aggressive store growth, which suppressed like-for-like sales this quarter, must be more carefully managed in future, to ensure that the pace of expansion does not continue to drag on its underlying sales performance.” – Conlumino retail analyst Dido Tetley

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“Unexpectedly, B&M brought forward its scheduled first-quarter update (for the 13 weeks to June 27^th) by two weeks, presumably to reassure investors that it had come through a period with tough comps in good shape… and it has, although like-for-like sales growth in the UK was only 1.1%, after a difficult May for the outdoor seasonal business.” – Independent analyst Nick Bubb

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“We maintain our forecasts at this early stage. We expect LFL to improve as the year progresses and the news on store openings suggests upside risk to our current FY16 forecast of 24% pre-tax profit growth. We continue to expect the UK gross margin to ease slightly in FY16 reflecting historic currency exchange trends, and for selling, general and admin expenses to remain stable relative to sales.

“In Germany, the two new format stores are trading in line with budget, with more expected to open during the year. The remainder of the business remains on track.” – Matthew Taylor, Numis

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“B&M’s domestic roll-out story has yet to miss a beat, unlike some of last year’s IPO arrivals in the public arena. It plays strongly to the ongoing consumer propensity to “value”, with a highly flexible model in terms of store size and location.

“This is complemented by the potential to replicate its UK success on an international plane. The German acquisition remains a work in progress with regard to benefiting from B&M’s buying expertise and scale.

“We remain fans of B&M’s business model, but continue to struggle with the group’s equity valuation.” – David Jeary, Canaccord Genuity