B&M's Frozen Food Arm Faces Uncertain Future as Performance Dips
The future of a major UK supermarket chain with 340 stores has been cast into doubt following the second profit warning in just three months. B&M, the prominent bargain retailer, has initiated a further strategic review of its frozen food subsidiary, Heron Foods, after openly acknowledging that the chain is significantly dragging down overall group performance.
Financial Underperformance at Heron Foods
In a recent trading update, B&M revealed that its convenience and frozen food chain, Heron Foods, is suffering from what it termed "financial underperformance." The company reported that Heron's sales experienced a slight decline of 0.1% during the last quarter. This underperformance has been a key factor in the group's decision to revise its full-year financial guidance downwards.
The broader B&M UK operation also faced challenges, with like-for-like sales falling by 0.6% over the crucial quarter leading up to December 27th. However, the company noted an "encouraging" 3% sales increase in December alone, with this growth trend reportedly continuing into January.
Strategic Review and Repositioning Efforts
B&M stated that it continues to actively "review and reposition our customer offer" at the Heron Foods specialist frozen food chain. The company attributed the downward movement in its performance range to several factors, including ongoing investments in competitive pricing, clearance of discontinued product lines, and improvements in stock quality, alongside the specific struggles at Heron Foods.
Tjeerd Jegen, who was appointed as chief executive last year, commented on the situation, stating: "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."
Confidence in Recovery Plan
Despite the current challenges, B&M expressed confidence in its recovery strategy. The company has ramped up efforts to reduce unwanted stock through significant discounts and has implemented a "back to basics" plan launched last October, which has seen it sharpen its price offering to consumers.
The group asserted that it is "confident the actions we are taking can restore sustainable like-for-like growth at B&M UK over the next 12 to 18 months." This statement reflects management's belief that the current strategic adjustments, though painful in the short term, will ultimately strengthen the company's market position.
B&M operates numerous stores across Birmingham and competes in the highly competitive UK retail market against rivals including Lidl, Aldi, Sainsbury's, Asda, Tesco, Marks and Spencer, and other frozen food specialists like Iceland. The performance of Heron Foods will be closely watched by industry observers as B&M navigates this challenging period.
