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B&M shares slide to a discount as German business tanks

The future of its German business, Jawoll, is under review after its weak performance caused the retailer's overall profits to decline 71%

B&M European Value Retail SA -
Jawoll was acquired for EUR€80mln in 2014

Shares in B&M European Value Retail SA (LON:BME) sank to their lowest price in three months after the discount retailer revealed a £59.5mln impairment charge from its poorly performing German business.

The FTSE 250 variety store said on Tuesday that its Jawoll business in Germany, acquired for EUR€80mln in 2014, was troubled by weak sales and distribution issues in the first half of the year.

READ: B&M sales soar following another record Easter

The group is now undertaking a strategic review to determine Jawoll’s future.

The impairment charge also caused overall pre-tax profits to plunge 71%, down to £32.2mln in the six months ended 29 September.

In the UK business, the performance in the first half of the year trended up, with overall revenues increasing 12% to £1.8bn, led by 14% growth in UK stores as “solid” like-for-like sales growth continued into the start of the festive holiday trading period.

The bargain retailer has opened 30 UK stores this year, with plans to open 16 more before the financial year-end, against a backdrop of weakening consumer confidence that has already spelled the end for big brands like Mothercare, LK Bennett, and Toys’R’Us.

Chief executive Simon Arora was encouraged by the performance, saying that B&M’s top five store opening days ever have occurred in the last year, “despite the continued uncertainty in the economic environment generally”.

Broker Liberum was encouraged by strong UK trading heading into peak season as the group maintains a competitive 15-20% price gap on branded items, compared with supermarket chains.

Shares were down 9% to 344.3p in early trading on Tuesday.

Quick facts: B&M European Value Retail SA

Price: 483.8 GBX

LSE:BME
Market: LSE
Market Cap: £4.84 billion
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