The discount retailer has cut earnings guidance to £440m-£475m amid declining UK sales as it continues its ‘back to basics’ turnaround plan.
The B&M store at Cables Retail Park in Prescot(Image: Liverpool Echo)
Discount retailer B&M has issued another profit warning as sales remained under pressure and after it implemented price cuts as part of its ongoing transformation programme.
The Liverpool-headquartered company reported that UK like-for-like sales declined by 0.6% during the crucial quarter ending December 27, though it noted an “encouraging” 3% uptick in December, with momentum carrying through into January.
The group revised down its full-year underlying earnings forecast, for the third time since October, to between £440 million and £475 million – down from previous guidance of £470 million to £520 million.
That would mark a big decline from the £620 million in underlying earnings recorded for the year ending March 29 2025.
B&M’s share price dropped by as much as 5% during Thursday morning trading, before stabilising at just over 1% down.
The company explained: “The downward movement in range is driven by ongoing investments in pricing and clearance, improvements in stock quality and the financial underperformance of Heron Foods, where we continue to review and reposition our customer offer.”
Heron Foods saw sales edge down by 0.1% during the most recent quarter.
B&M revealed it has intensified efforts to shift excess inventory through substantial markdowns and remains “confident the actions we are taking can restore sustainable like-for-like growth at B&M UK over the next 12 to 18 months”. The group’s “back to basics” strategy, initiated last October, has led to a more competitive pricing structure, including widespread price reductions.
The company has also significantly trimmed its product range in various categories as part of an effort to streamline operations and cut costs.
In addition to trading pressures, the company was hit last October by an accounting error when it failed to correctly account for an additional £7 million in overseas freight costs, leading to a reduction in annual earnings guidance.
On Thursday, the group announced that its investigation into the incident had concluded, stating that the “implementation of the report’s recommendations on specific IT and financial operational processes is under way”.
Tjeerd Jegen, who became chief executive last year, said: “As we progress ‘Back to B&M Basics’, we are identifying opportunities to make deeper investments in clearing discontinued lines.
“As with our pricing actions, these are investments in the long-term strength of B&M, but they do impact near-term financial performance.
“As a result, we are revising our full-year guidance downwards to reflect these actions and the financial underperformance at Heron.”
He added: “We entered our Golden Quarter sharper on price to reinforce our value proposition with our customers. Price investment has continued, particularly in FMCG, and while the full benefits will take time to come through.”
