B&M European Value Retail SA (LSE:BME) shares tumbled 13% as it warned that first-half profits are likely to fall 28% year-on-year after sales contracted in the second quarter.
Adjusted EBITDA for the period is expected to fall to around £198 million from £274 million a year earlier, due to margin pressure, lower LFL sales in the UK and increased wage costs.
Full-year EBITDA is likely to fall in the range of £510 million to £560 million, from £620 million the year before.
UK like-for-like sales rose 0.1% over the half, after a 1.1% decline in the second quarter, which was weaker than expected.
There was better momentum in the much smaller French business, where revenues grew 13.4%, with LFL growth of 5.2%.
Total revenue for the 26 weeks to 27 September is expected to come to £2.75 billion, up 4.0% on the prior year, as 23 new store opennings are taken into account.
Chief executive Tjeerd Jegen, who took over in June, has launched a turnaround strategy called 'Back to B&M Basics' aimed at addressing operational weaknesses.
“Since becoming CEO in June, I have led the business through a comprehensive review of our customer proposition and operations. We have concluded that while B&M's value proposition remains strong, our operational execution has been weak,” said Jegen.
He added: “We have already sharpened our price position, and we are moving with pace to refocus our ranges, improve on-shelf availability and bring back excitement to our stores.”
The plan includes price cuts on key FMCG items, refreshed promotional activity, range simplification and improvements to stock availability.
Between 40-45 gross new UK store openings are expected for the full year.
Shares fell 33p to 223p in early trading on Tuesday.
Analysts were a mixture of disappointed and hopeful about a turnaround plan announced by Jegen.
Jefferies’ Andrew Wade said the update marked "another miss", but "finally heralds the first evidence of the much-anticipated price reset in FMCG".
"The first cut looks limited in scale, but we must be encouraged that proactive actions are now being taken to address the declines."
** UPDATE: Share price, analyst comment added. **