B&M Q1 sales up 13.5% as shoppers hunt for bargains

B&M European Value Retail reported a 13.5% rise to £1.3bn in group first quarter revenue, in line with expectations, as consumers searched for bargains amid the cost of living crisis.

Like-for-like sales in the core UK business were up 9.2% as both grocery and general merchandise categories performed “very well, driven by consistently strong and positive LFL transaction numbers”, the company said in a trading statement on Thursday.

Total UK revenues were up 11.3% higher in the 13 weeks to June 24 to £1.07bn, while sales in France, where it has about 100 stores, were up 29% to £117m. However, the news seemed to displease investors, who marked the shares down by around 4% in London trade.

Revenues at its Heron Foods business, which has 306 stores, rose 19.4% to £135m.

B&M, which sells everything from food to garden furniture and toys, last month said it had struggled with “economic headwinds” and “material cost pressures”, but chief executive Alex Russo said the company had started to notice deflation in some areas of the supply chain.

The business is planning to open 30 new B&M shops in the UK over the next year. It wants to have a minimum of 950 nationwide over the next few years.

“B&M is the ultimate play on the cost-of-living crisis, offering a range of goods at cheap prices. Chief executive Alex Russo says the business has ‘strong trading momentum’ which is no wonder when interest rates keep going up," said AJ Bell investment director Russ Mould.

“Argos used to be seen as the go-to place for such items, but it feels like B&M has taken over as the public’s favourite places to buy known brands at cheaper prices. Argos has suffered from its shrinking high street presence while B&M’s expansion has put its stores front of mind for the shopper.

“This should provide long-lasting benefits. Even when the cost-of-living crisis fades away, B&M in theory should be able to keep many of the customers it won during the tougher economic times, particularly if it continues to offer good for value for money.

“So why has the share price fallen 6% on the news? It could be the lack of full-year guidance which implies no upgrades to earnings expectations. The shares have already had a strong run this year, up more than 30%, so perhaps some investors are banking profits while the going is good.”

Reporting by Frank Prenesti for Sharecast.com