Value giant B&M has reported a group revenue fall of 2.2% in its latest quarter, but there was also ”an improving trend” over the period.

As Alex Russo gets set to take over the leadership of B&M from co-founder Simon Arora, here are five things you should know about the discount powerhouse from our Prospect analysts.

B&M, Stafford

Variety store business B&M Group generates some £4bn of annual sales from its three divisions – B&M UK, Heron Foods UK and B&M France – and is one of the UK’s most profitable retail groups. B&M is likely to continue to grow ahead of the market – Prospect estimates that total sales will surpass £7bn by financial year 2026 as B&M continues to expand its presence, both physically and, potentially, online. 

 

Here are five things you need to know about the disruptive brand from our Retail Week Prospect analysts.

1. What seemed like an ambitious long-term target of 950 UK B&M stores is increasingly looking like a conservative number. Based on the current portfolio of just over 700 stores, an estimated 38% of the UK population lives more than three miles from a B&M shop. The annual opening programme has been upped to around 40 stores this year, with no likely shortage of future sites as embattled retailers continue to reduce their physical presence.

 

2. Success in categories such as toys, where B&M was awarded Multiple Toy Retailer of the Year at the Toy Industry Awards this year, highlights the inroads the discounter can make in specific categories by virtue of its widespread physical coverage and the disappearance of an increasing number of specialists from the high street.  

3. The acquisition of Heron Foods five years ago increased B&M’s scale in grocery and gave it access to the relatively buoyant convenience store market; however, the smaller business has put pressure on the bottom line. Heron Foods accounted for 9.5% of B&M group UK sales in financial year 2021, but just under 4% of adjusted EBITDA. Despite this pressure, the group as a whole remains one of the UK’s most profitable discounters, generating a robust 13.1% operating margin in 2021. This is largely due to B&M UK’s stellar margins.

 

4. Bolstered by the rebranding from Babou to B&M and the re-merchandising of the business to focus more on FMCG, B&M France was the only one of the retailer’s three divisions to grow sales year on year in 2021. This was partly down to the UK businesses coming up against such strong comparatives for 2020 when their essential retailer status meant they could continue trading uninterrupted during lockdowns. The French operation also outperformed the two domestic businesses in terms of profit growth, notching up an adjusted EBITDA margin of 9.2% in 2021 against 3.6% in 2020 following a threefold increase in adjusted EBITDA to £32m (2020: £11m). The French operation had been loss-making in 2019. Having been quick to divest its German business when the going proved tough, France will be the sole focus for international development for now.

 

5. Having continued to maintain that its low-cost business model would not support a transactional website, the appointment of The Range’s Jens Sorenson to the new role of digital director in 2021 indicated that the retailer was having a rethink. B&M has now gone live with a very limited ecommerce trial, starting with garden furniture. The trial will extend to around 1,000 product lines, comprising a combination of bulkier or higher-ticket general merchandise items and products that “do not require disproportionate mail-order packaging”. If it can make it work, this could be another key growth channel for the retailer.

 

 

 

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