B&M signals good start to the year after posting 25% profit rise

Pre-tax profit for the 53 weeks to the end of March rose to £229.3m from £182.9m as revenue increased 22.4% to £2.98bn. Excluding the extra week in 2017-18, profit rose 23.6% to £226.1m.

Revenue at UK B&M-branded stores open a year or more rose 4.7% last year with particularly strong sales in the first three quarters. It said the fourth quarter was disappointing as cold weather held back sales of spring items.

B&M said the first quarter of the current year had started well though like-for-like revenue rose more slowly than last year at 3.1%. It said it was confident of a solid outcome for the quarter.

The FTSE 250 company’s gross profit margin narrowed to 33.9% from 34.8% last year as it sold more lower-margin groceries in the UK and cut prices on goods made more expensive by the rising dollar. In Germany margins were compressed as B&M cleared out old products.

B&M sells general merchandise ranging from toothbrushes to garden furniture at low prices. It has grown rapidly since floating on the stock market in 2014 as shoppers whose incomes have been squeezed have turned to discount retailers such as Aldi, Lidl and B&M.

The rise of the discounters has caused extra problems for established retailers struggling to deal with weak consumer spending, higher wage costs, rising import prices and the shift to online shopping. Dunelm and Dixons Carphone both posted profit warnings in the run-up to B&M’s results.

Chief executive Simon Arora said: "B&M has delivered another set of strong results by doing what we do best, which is providing great value week-in, week-out on the things customers buy regularly for their homes and families.

"The B&M model is highly relevant for the current difficult economic environment, with its strong position in the value and convenience areas of retailing where physical stores are winning. The business is well placed for continued profitable, long-term growth. In a retail sector beset by structural challenges B&M's unique, disruptive model stands out as a success story."

The company's shares have fallen 14% since hitting a record 432.6p in mid-February as investors have worried about the effect on B&M of the extreme weather that hit retail sales in March. The shares fell 0.8% to 370p in early trading after the results were announced.

B&M announced a final dividend of 4.8p a share taking the annual payout to 7.2p a share - up 24.1%.