Liverpool’s B&M puts German business under review

Shares of Liverpool-based bargain retailer B&M European Value Retail fell about 6% on Tuesday after it wrote down the value of its loss-making German business Jawoll and put it under review.

B&M’s performance in Germany overshadowed a solid first half from its main UK business.

Announcing interim results for the 26 weeks to September 29, 2019, B&M said its pretax profit fell 70.5% to £32.2 million which included an impairment charge of £59.5 million relating to Jawoll. 

Group revenue increased 12.4% to £1.76 billion.

B&M shares fell 6% to around 356p to give it a current stock market value of around £3.7 billion, slightly more than Marks & Spencer.

B&M CEO Simon Arora said: “We have delivered a solid overall first half performance driven by our core B&M UK stores business which constitutes 86% of group sales.

“Our existing stores performed consistently well through the last two quarters, generating half year LFL of 3.7%.

“The current crop of new stores also achieved especially strong results.

“The core business has made a solid start to the second half of the financial year.

“Heron Foods has continued to grow in the UK and we remain very pleased with the overall progress of that business.

“In Europe, we have seen contrasting performances from Babou in France and Jawoll in Germany.

“Babou has made good progress with the planned changes to its product offer.

“The performance of Jawoll has continued to be impacted by trading and operational issues and its financial performance remains disappointing.

“The board is carrying out a strategic review of Jawoll in order to determine its future.”

Analysts at Peel Hunt wrote: “B&M’s UK performance is extremely strong in H1, with LFL accelerating in Q2 and the new stores performing very well.

“However, the headlines will be grabbed by the poor German performance (EBITDA losses of £12m) and the strategic review may bring about a departure from Jawoll.

“This places a two-way pull on the shares.

“On the one hand, B&M’s credentials as a European giant are tarnished but on the other, at least here’s a management team that knows when to stop throwing good money after bad.

“There’s a small downgrade here today on extra short-term German losses but with France doing well, we expect a return to forecast momentum if B&M calls it a day in Germany.

“The shares have been range-bound and the dream of a global growth multiple may be over, but there’s still plenty of upside for this very cash-generative discounter …

“Medium term, we believe that B&M is in great shape: the UK is powering on and there will be a special dividend in time.

“Any weakness around German disappointment is a buying opportunity.”