The share price of discount home goods retailer B&M European Value Retailer, or B&M to most of us, leapt almost 7% yesterday on a trading update that announced an unexpectedly fat first-half profit. The retailer, whose more than 600 B&M-branded stores across the UK sell everything from homeware and cleaning products to gardening & DIY products, toys and even some food, released an unexpected statement to announce the profit upgrade.
The six months to September 25 will, said B&M, yield a pre-tax profit of between £275 million and £285 million. Analysts had been expecting a significantly lower figure, closer to £235 million. Better than expected gross margins were the biggest contributor to the impressive performance from a company that has proven itself to be a “lockdown winner”.
The company commented:
“Performance of general merchandise and seasonal categories has been particularly encouraging. Sell-through rates in those categories have been high and accordingly end-of-season markdowns have been limited.”
Thanks to selling goods deemed as “essential”, B&M stores were allowed to stay open throughout the whole lockdown period. The group also owns the Heron Foods convenience stores chain, which has around 275 shops across mainly the north of England, and about 90 outlets in France.
In the UK, B&M’s usually out-of-town, or edge-of-town, locations and spacious stores and low prices have particularly appealed to consumers over the pandemic period with many preferring to avoid shopping centres and high streets, even when open. B&M was founded in Blackpool way back in 1978 and listed as a public company in 2014. The company has always been a steadily successful business but has certainly been a late bloomer in how it has risen to greater prominence over the past decade or so.
The company has, however, been keen to stress that there is significant uncertainty over how the end to lockdown restrictions and a possible delayed economic blow as government support is withdrawn may impact future performance. Chief executive Simon Avora commented yesterday:
“A strong start to the new financial year and sales remain significantly above pre-pandemic levels. As expected, trading throughout the first quarter was volatile as we annualised against the high comparatives from last year”.
“Although there remains much uncertainty as to how consumer spending evolves over the coming months, we remain optimistic that our combination of exceptional value across a wide range of product categories and our convenient out-of-town locations will continue to resonate with customers.”
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