Investors in B&M European Value Retail SA (LSE:BME) seemed unimpressed after finance chief Alex Russo was promoted into the role of chief executive after Simon Arora stepped down.
Alongside full-year results, the FTSE 100-listed discount retailer said a handover has begun but an official date for the transition is yet to be set.
Underlying earnings (EBITDA) were better than expected but trading in the first eight weeks of the new financial year in the UK has seen like-for-like (LFL) sales fall 13.0% and margins are expected to shrink.
UK adjusted EBITDA margin is expected to fall 70-130 basis points but to "remain structurally higher than pre-pandemic levels" as management expects the discount food offer to “benefit from increased demand as a result of new customers switching to B&M as they look for greater value for money”.
For the past year to 26 March, EBITDA was reported at £619mln, down from the bumper prior year's £626mln but slightly ahead of expectations. Pre-tax profit remained flat at £525m.
LFL revenue dipped 9% to £4.67bn as demand for its fascia products fell, but the company reported a 13% equivalent increase in revenue on a two-year basis.
The retailer, which offers a variety of products from household items to clothing at a discount price point, said its sales were “significantly higher than pre-pandemic levels” as it retained new customers in core and expanding markets.
It reported diluted earnings per share of 42.1p for the period, slightly below the 42.7p it posted a year earlier.
B&M ended the year with total debts of £750mln, on a leverage ratio of 1.3 x underlying earnings, within its leverage ceiling of 2.25x Ebitda.
Management have decided to double-down on the group's new French operations and discounted food products in the year ahead, which are expected to appeal to those affected by the rising cost of living, following an uncertain outlook in the general merchandise sector.
“The core B&M UK business has acquired, and most importantly retained, a number of new customers, and this provides an exciting platform from which to continue taking market share across a number of product categories,” Arora said in a CEO note.
“In France, the B&M brand has been well received, the financial performance is much improved and the business is unrecognisable to the one we acquired in 2018 in terms of customer proposition.”
B&M’s shares fell 12% to 403p in the first hour of trading on Tuesday.
UBS analysts said both the current trading and EBITDA outlook, which at its mid-point is 4% below the City consensus, "look weaker than expectations".
"We expect the shares to react negatively given this outlook, notwithstanding the -28% YTD performance, though some of it was related to the CEO Simon Arora's departure."
** Update: adds broker comment **