Investors raced to get back into B&M this week as early signs of progress in the embattled group’s turnaround plan led to a share price rally.
The value jump came despite a 47% slump in pre-tax profits to £227m in the year to 28 March, which was slightly better than analysts had feared.
Revenues climbed 3.6% higher to £5.8bn thanks to store opening but sales in the UK were flat on a like-for-like basis.
New boss Tjeerd Jegen launched a turnaround plan after joining the discounter last summer following a torrid run of events at the company, which included profit warnings and errors in its accounting that led to the departure of finance chief Mike Schmidt.
B&M also lost ground against more fiercely competitive supermarkets.
The ‘Back to Basics’ strategy, launched in October, focused on trimming SKUs, clearing discontinued stock, improving promotions and sharpening prices.
This week, Jegen said UK sales were showing signs of improving and he was confident margins would bounce back as phase two of the turnaround got underway.
Shares jumped 15% to 196p as a result and continued to soar another 5% higher today. The stock had been down by around 50% in the past year before this week but has now clawed back 20% of its lost value in just the past five trading days.
“Expectations were so low for B&M after a string of profit warnings they may as well have been underground,” AJ Bell investment director Russ Mould said. “A set of results with a hint of encouragement was enough to fire the share price higher.
“Profit and earnings plunged as costs soared, but there was nothing new in the numbers to spook investors.”
Analysts at Bernstein added the results had drawn a line under a year of reset but warned of a long road ahead.
Jonathan Pritchard of Peel Hunt agreed there was much still to do. “Tjeerd Jegen has made a good start at B&M,” he said. “He has set out a plan, and the early signs are promising, but it remains early days for the refresh.”
“On price, while promotions skew the headlines, the underlying position is B&M is back to being 15% cheaper than the big four, and only out of kilter with Home Bargains on 4% of lines. Availability on key fmcg items is now 95% and rising.”
GlobalData retail analyst Emily Scott added: “Despite some improvement in fourth-quarter performance, recovery remains fragile, and additional measures are necessary to enhance B&M’s value credentials for customers.
“Although B&M has the right plan in place, it needs to accelerate improvements in pricing and product availability to keep consumers engaged.”
David Hughes of Shore Capital warned with no guidance yet given for FY27, the outlook remained uncertain. “The question is where does B&M go from here in terms of returning to LfL growth and repairing margins,” he said.
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