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B&M records dip in sales as retail giant hikes prices and ploughs on with store openings

The discount retailer blamed challenging market conditions, yet its value-led business model should have thrived in a period where consumers were watching their pennies, an expert said

[B&M is expanding across the UK]

B&M is expanding across the UK(Image: (Image: Getty))

Budget retailer B&M has revealed a dip in UK sales as it faced cautious shoppers and weak wage growth for lower-income households. The retail chain said cutting some of its prices had resulted in it making less money for products like homeware, toys, and electricals.

In the UK, revenues declined by 3.1% over the year to March 29, compared like-for-like with the previous year. However, including the impact of the 36 net new stores opened over the year, revenues grew by 3.8% to 4.5 billion. The groups pre-tax profit fell 13% to 431 million year-on-year, which it said was impacted by higher interest and finance costs.

B&M, which has 777 stores in the UK and 135 in France, as well as 343 Heron Foods and B&M Express shops, said it faced a challenging retail environment.

[It comes as the retailer announces 45 new stores]

It comes as the retailer announces 45 new stores(Image: (Image: Getty))

Shoppers were affected by limited wage growth, especially for its lower-income customer base who faced a cut-off in Government cost-of-living payments during the year, the company said.

It also flagged heightened cautiousness to spend among consumers, and very subdued garden spending due to poor weather at the start of its financial year.

Furthermore, B&M said its own operations could have been better and it was now addressing this.

For example, it reduced prices on some general merchandise products in UK shops which drove a higher volume of sales, but dragged on the total value of sales over the year.

B&M said it had adjusted its range to now include more products sold at a higher price, which had boosted both the volume and value of sales in recent months.

[The group said the year ahead would bring new challenges for the sector]

The group said the year ahead would bring new challenges for the sector(Image: (Image: Getty))

The group said the year ahead would bring new challenges for the sector, namely higher labour costs and inflation.

It is expecting to face a roughly 75 million hit from increased national insurance contributions, the higher minimum wage, and additional packaging taxes which came in from April.

Work continues to reduce the impact of these pressures, through driving productivity improvements and sales volume growth, B&M said.

The underlying market trend towards discount retail continues, and the groups value proposition will continue to resonate with consumers navigating ongoing economic pressures.

Russ Mould, Investment Director at AJ Bell, said: Shrinking profits, reduced cash flow and higher net debt frame a poor year for B&M.

"The discount retailer blamed challenging market conditions, yet its value-led business model should have thrived in a period where consumers were watching their pennies.

It should have mopped up extra business from people trading down from more expensive options, while also being a shop of choice for cash-strapped individuals wanting bargains.

The imminent arrival of a new CEO cannot come soon enough. Investors will be looking for the new boss to do a thorough review of the business, work out whats gone wrong, do a kitchen sink job and outline a plan to get back on top. B&M is quite a big beast in the world of retail, so this might not be a quick fix.

The lack of commentary on current trading is unhelpful, leaving investors guessing as to whether the recent sunny weather has driven an improvement in footfall and sales. However, it does allude to ongoing cost pressures, meaning the company needs to make hay while the sun shines.

For now, its a waiting game until the new CEO has time to look under the bonnet and fine-tune the strategy.

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