B&M shareholders have endured another week of fresh volatility as first-quarter trading disappointed the City and the discounter’s turnaround plan appeared to stall.
Like-for-like sales in the UK fell by 2.3% in the 13 weeks to 27 June, with B&M blaming April showers for a slow start to its garden and outdoor season and strong comparatives a year ago when the weather was dry and warm.
The decline was much worse than analyst expectations for a 1.5% dip, and follows falls of 0.1% in Q4 and 0.6% in Q3 last year.
B&M is working through CEO Tjeerd Jegen’s ‘Back to B&M Basics’ transformation strategy, kicked off in October, to sharpen prices, improve promotions, clear out old stock and trim SKUs.
Trading margins in the UK fmcg business remained below prior year levels as B&M continued to invest in price, while general merchandise margins were better than a year ago.
Group revenues rose 2% to £1.4bn in the quarter, helped by a 14.6% jump for the French business and a 2.8% increase at frozen retailer Heron Foods.
Jegen said on Wednesday, in a statement accompanying the trading update, that the group continued to deliver on the turnaround.
Shares sank by more than 6% to 189p in reaction to the news, before staging a partial recovery on today (16 July). The stock is up more than 20% this year as markets backs Jegen’s turnaround, but the share price remains 13% lower over a one-year period and more than 60% down on five years ago.
Panmure Liberum said it was “throwing in the towel” as it downgraded B&M from a ‘buy’ to ‘hold’, moving its target price from 230p to 200p. The broker also lowered its pre-tax profit forecasts for the year by around 10%.
Analyst Ben Hunt said trading in Q1 was soft and there was little evidence of recovery. “We were surprised by the lack of top-line growth in Q4 FY26 despite significant clearance activity, followed by further weakness in Q1,” he added. “While management cites tough comparatives, Q1 FY26 was not especially demanding overall. Problem child fmcg shows few signs of recovery, with supermarket competition continuing to weigh on performance. Our expectation that higher general merchandise pricing could fund greater investment in fmcg has yet to deliver a material benefit, while we are unconvinced that SKU rationalisation alone will address B&M’s underlying issues.”
Independent retail analyst Nick Bubb said it seemed “a bit odd” for B&M to hark back to the slow start to the gardening season in April after the boost it should have enjoyed from heatwaves in May and June.
Dan Coatsworth, head of markets at AJ Bell, added B&M was “still wading through mud” and putting in a lot of effort for limited progress.
“Investors are displeased with the overall performance, sending the shares down,” he said. “Contrarian investors might like the cheap valuation at B&M, but it continues to be a waiting game for the share price to regain the strength it once enjoyed.”
Richard Trainor of Bernstein said margins at B&M would need to remain lower than expected for the transformation to succeed.
“These results reinforce the picture from full year results that fmcg margins have fallen and will stay low (though probably not fall further),” he added. “Although general merchandise margins are rising, we expect that pressure on the lower income UK consumer will make this difficult to sustain.”
Jonathan Pritchard of Peel Hunt was more optimistic and said he saw the recovery in UK like-for-like sales as “a matter of timing rather than a question of execution, with Back to Basics initiatives making good progress”.
“Overall, this was a solid first quarter against tough comparatives,” he added.
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