B&M European Value Retail SA (LSE:BME) shares tumbled more than 6% after it posted what analysts said was a “curious” set of full-year results.
During the twelve months, underlying earnings came in at the top end of guidance, on the back of new store openings and what management said was volume-led growth.
However, veteran retail analyst Clive Black at Shore Capital was left with a lot more questions than answers following the update.
His initial query was about the lack of forward-looking guidance, with “no indication of PBT/EPS expectations or current trade” in Wednesday’s report.
Black told investors to keep an eye out for forecasts from house brokers, as he labelled the company’s issued guidance as “an interesting blend of comments, much of it backwards looking”.
Questions were also raised regarding the company’s claims of volume-led growth, with the Shore Capital analysts stating that information on like-for-like volume appeared “elusive”.
“A curious statement from B&M here with much mention of volume growth but we are simply unclear how LFL volumes have come through noting inflation in fast-moving consumer goods in FY24 that we do not believe the Group could avoid whilst sustaining the aforementioned EBITDA margin,” Black said.
B&M also revealed its longer-term plan to open 1,200 new stores in the UK.
Black added: “Hostage to fortune comes to mind, as competition, attrition and cannibalisation must build.
“We also wonder if B&M is starting to find life tougher against the value-based superstores, especially around loyalty pricing (Tesco’s LFL sales growth is much stronger), whilst the grocery discount chains also roll-out space.”
He warned that the market is likely to be spooked by this update should management fail to reassure investors in the near term.
“B&M has been a high-quality bargain store play but maybe it is reaching a point where it should evolve into something more cash compounding, but it is not, which is a bit of a worry,” he concluded.