The half-year update from B&M European Value Retail SA (LSE:BME) produced mainly disappointment from analysts and investors, though there was a sliver of hope about a turnaround plan announced by new CEO Tjeerd Jegen.
Second-quarter UK like-for-like sales fell 1.1%, a sharp slowdown from the 1.3% growth in the first quarter that was, noted Jefferies’ Andrew Wade, boosted by Easter and weather effects.
While this marked "another miss", Wade said, it "finally heralds the first evidence of the much-anticipated price reset in FMCG".
Under Jegen's 'Back to B&M Basics' plan, actions are being taken to improve performance, including lowering prices on 35% of FMCG KVIs (fast-moving consumer goods key value items) by an average of 1.8%, spicing up 'managers special' promos, reducing the variety of products on shelves and clearing discontinued ranges, and improving availability.
B&M expects the full impact of the plan will take 12-18 months, but is confident it will return LFL growth, with EBITDA margins at least at the FY26 level.
"The first cut looks limited in scale, but we must be encouraged that proactive actions are now being taken to address the declines," said Wade.
Peel Hunt analyst Jonathan Pritchard called the results were “disappointing”, highlighting sales below City expectations and investment in margins, meaning first-half profitability will be down significantly.
He cut his EBITDA forecast from £620 million to £510-560 million. "This represents a material downgrade, and it is unlikely that margins will rebound quickly."
"The shares have been relatively weak, and with this warning, they are likely to remain under pressure for now."
Panmure Liberum’s Ben Hunt said early positives in the period were a shift back to higher-value general merchandise products and some price inflation in FMCG.
Gross margins in Q1 were impacted by deflation in general merchandise and lower bought-in margins, pressures which eased in Q2 as pricing annualised and new autumn/winter ranges with stronger margins were introduced.