Taking the helm of a business from an entrepreneurial founder is often a challenge. On top of that, new B&M chief executive Alex Russo is facing volatile market conditions that already mean profits this year are likely to be below last.
Russo, at present B&M’s chief financial officer, succeeds the highly regarded Simon Arora in the top job at B&M – the exact handover date is still to be finalised – as the value giant confronts difficult conditions.
B&M’s annual results revealed a slight fall in adjusted EBITDA. In the new financial year so far sales have been down 13.2%, year on year although they are still strongly up on pre-pandemic levels.
The shares slid 15% on the day of the results disclosure. Broker Investec observed: “Some may question how management will deliver new profit expectations given top line trends and the deteriorating margin outlook.”
Russo takes over too from one of the industry’s greatest entrepreneurs of recent years. Simon Arora and his brother Bobby – who remains at the retailer as trading director – took B&M from a 20-store business to one with 1,100 branches, international operations and FTSE-100 status.
The Arora family trust speaks for about 7% of B&M’s shares, so Simon Arora will retain significant influence despite relinquishing his executive duties.
Retail executive search specialist Tony Gregg, the founder of Anthony Gregg Partnership, says succeeding Arora is “like taking over from Alex Ferguson”, but believes that Russo will be up to the task.
He points out that Russo, who has been at B&M since October 2020, brings previous experience of dealing with hands-on family owners, having been at variety store group Wilko for two years before joining B&M.
Gregg says: “It was similar to B&M. He knows what it’s like working for owner-managed businesses.”
“He’s not going to be a gung-ho maverick”
Tony Gregg, founder, Anthony Gregg Partnership
His time since at B&M means he “has had a good look round” so there should be no unexpected surprises, and Russo can bring to bear “the advantage of working for massive corporations” such as Asda under Walmart’s ownership, Tesco and Kingfisher.
“He’s not going to be a gung-ho maverick,” says Gregg. “He’ll put in more corporate processes, which is needed in a business of that size. He is a people person too – he does walk the stores and he’s good with people.”
B&M said that since arriving at the retailer Russo has “demonstrated impressive commercial acumen and operational management skills in addition to being a highly capable CFO” and that “the appointment of an internal candidate reflects the strengthening of the senior leadership team over the past few years”.
Chair Peter Bamford said: “He has demonstrated strong leadership skills and a deep appreciation of the B&M culture and business model.”
Russo’s experience in food and general merchandise retail should serve him well in his new post. B&M sells food in its eponymous stores and owns value retailer Heron Foods.
His financial skills may be called upon as B&M embarks upon a tentative online pilot. Finding the right business model has proved challenging for many value retailers because of low order values.
B&M said in its results that it intends to launch an online home delivery service “shortly on a limited range of items”.
It said: “This trial will ultimately extend across c1,000 SKUs representing in part bulkier or higher ticket general merchandise items which customers cannot always easily transport home from stores themselves or products that do not require disproportionate mail order packaging.
“Given the disruptive B&M price position, the business believes this could prove an attractive proposition for customers. However, it remains open-minded as to the long term potential of the trial, and a test and learn approach will be adopted over the coming months as customer response is closely monitored.”
Russo however is expected in the main to pursue the same strategy that enabled Arora to turn it into such a powerhouse.
Arora said in a valedictory message in the results: “We promote from within, it’s our home-grown entrepreneurial culture, coupled with an ability to operate ‘at B&M speed’, that gives us an edge over the competition.
“I wish Alex every success in preserving and building upon these values when he takes over the role. If we stay true to them, B&M has a prosperous future for many decades to come.”
As he takes up the reins, Russo will know that he has a hard act to follow.
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