B&M Discount Retailer Issues Third Profit Warning Amid Turnaround Challenges
Discount retailer B&M has issued its third profit warning since October, with the company's chief executive warning that meaningful change will take time to materialise. The Liverpool-headquartered business has significantly revised down its earnings guidance as UK sales continue to decline, despite implementing aggressive price cuts as part of its ongoing transformation programme.
Sales Performance and Revised Financial Forecasts
The company reported that UK like-for-like sales declined by 0.6% during the crucial quarter ending December 27, though management noted an encouraging 3% uptick in December, with momentum reportedly carrying through into January. The group has now revised its full-year underlying earnings forecast for the third time since October, lowering expectations to between £440 million and £475 million.
This represents a substantial reduction from previous guidance of £470 million to £520 million, and marks a significant decline from the £620 million in underlying earnings recorded for the year ending March 29, 2025. Following the announcement, B&M's share price dropped by as much as 5% during Thursday morning trading before stabilising at just over 1% down.
Transformation Strategy and Operational Changes
The company's back to basics strategy, initiated last October, has led to a more competitive pricing structure with widespread price reductions across many product categories. B&M has revealed it has intensified efforts to shift excess inventory through substantial markdowns and has significantly trimmed its product range in various categories as part of an effort to streamline operations and reduce costs.
Tjeerd Jegen, who became chief executive last year, explained: 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.
Challenges Across the Business
The company attributed the downward revision in earnings guidance to several factors:
- Ongoing investments in pricing and clearance activities
- Improvements in stock quality management
- The financial underperformance of Heron Foods, where sales edged down by 0.1% during the most recent quarter
In addition to these trading pressures, the company was previously impacted by an accounting error last October when it failed to correctly account for an additional £7 million in overseas freight costs, which contributed to the initial reduction in annual earnings guidance. The group announced that its investigation into this incident had concluded, with implementation of recommendations on specific IT and financial operational processes now underway.
Future Outlook and Management Perspective
Despite the current challenges, B&M management remains confident about the company's future direction. The company stated 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.
CEO Tjeerd Jegen added further context: 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, we believe these are necessary steps for long-term success.
The company explained that the financial underperformance at Heron Foods continues to be reviewed, with efforts underway to reposition the customer offer at that subsidiary. As B&M navigates this challenging period of transformation, investors and market observers will be watching closely to see whether the back to basics strategy can deliver the promised turnaround in the coming months.
