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B&M European Value slips after mixed reaction to results

B&M fascia stores grew like-for-like sales 0.7% for the year after strengthening to 5.8% in the fourth quarter, while underlying earnings jumped 13.5% to £297mln

B&M European value store
B&M opened a net 44 stores in the UK last year and plans 50 more this year

B&M European Value Retail SA (LON:BME) lifted full-year revenue and profit on Thursday as the UK business enjoyed good trading momentum

Pre-tax profit rose 8.7% to £249.4mln in the year to 30 March as revenue swelled 17.1% to £3.5bn and investment was poured into new stores and a new UK distribution centre in Bedford.

READ: Barclays initiates coverage of B&M with 'overweight' rating

With 44 net store openings in the UK, B&M fascia stores grew like-for-like sales 0.7% for the year after strengthening to 5.8% in the fourth quarter, while underlying earnings jumped 13.5% to £297mln, with a 45-basis-point increase in margin to 10.6%.

Jawoll in Germany delivered a loss but progress was made in clearing out slow-moving inventory there and in France's Babou stores.

Chief executive Simon Arora said, “there is much work to be done to implement the disruptive, value-led B&M model in these large new markets”, but pointed to renewed momentum in the UK, where LFL sales growth was in the mid-single digits in the first seven weeks of the new financial year.

The final dividend was lifted to 4.9p a share from 4.8p in 2018, taking the full-year dividend to 7.6p, up 5.7%.

Mixed analyst reaction

Broker Numis said it was cutting its forecasts for B&M by 8% for the year ahead, primarily reflecting incremental rent and Bedford pre-opening costs.

But analysts at Peel Hunt raised their forecasts and said the underlying picture is “highly encouraging”, with UK momentum having returned and seeing "the risk is to the upside of sales estimates”.

They expect the current period will be a “year of good progress” despite several headwinds, while 2021 “will see the momentum change even further to the positive”.

B&M shares were down 4.4% to 363.25p by lunchtime on Thursday. 

Quick facts: B&M European Value Retail SA

Price: 369 GBX

LSE:BME
Market: LSE
Market Cap: £3.69 billion
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