Liverpool’s B&M lifts earnings expectations

Liverpool-based B&M European Value Retail S.A. said on Thursday it now expects its adjusted EBITDA for FY21 to be in the range of £590 million to £620 million — up from its previous range announced on January 7 of £540 million to £570 million. 

B&M is based in Liverpool and registered in Luxembourg — but its shares trade in London, where its stock has soared about 85% in the past 12 months to give the firm a current stock market value of more than £5 billion.

B&M announced the earnings expectations in a trading update relating to its fourth quarter of the financial year ending March 27, 2021.

“On 7 January 2021, the group announced strong revenue growth in its third quarter,” said B&M.

“It also noted the uncertainties relating to lockdown restrictions in the UK.

Notwithstanding this backdrop, revenues and margins have remained strong over Q4 to date, particularly in the group’s B&M fascia business in the UK.  

“Accordingly, the group now expects adjusted EBITDA (on a pre-IFRS 16 basis) for FY21 to be in the range of £590m to £620m, stated after the voluntary payment of business rates amounting to approximately £80m.

“This compares to the previous range announced on 7 January 2021 of £540m to £570m. 

Group sales will shortly annualise against the elevated sales, driven initially by consumer stockpiling in mid-March 2020, and which continued throughout FY21 due to the ongoing impacts of Covid-19. 

“This, together with the unknown impact of changes to restrictions in 2021, creates significant forecasting challenges which will persist well into the new financial year.”

AJ Bell Investment Director Russ Mould said: “Value retailer B&M continues to deliver the goods by upgrading its earnings guidance once again.

“It has likely benefited from being one of the few shops still allowed to open during the latest lockdown, so it has attracted customers who may have traditionally gone elsewhere for their shopping or simply like the in-store experience.

“It’s been in a sweet spot for the past 12 months and this purple patch looks like it will come to end from mid-April when non-essential shops are permitted to open again.

“B&M therefore only has a matter of weeks left to convince its newly acquired customers they should continue visiting its shops and not return to old habits.

“A lot of people think the pandemic will have changed shopping habits permanently and that people will view shops that were able to serve them through difficult times in a positive light.

“B&M’s management team will certainly hope that it is true, but they are also realistic that the business is about to lap an extremely strong year for sales, so the comparative figures will be very hard to beat.

“Fortunately B&M is very competitive on price and despite the OBR forecasting the UK economic recovery will be stronger than previously expected, there are still a lot of people out of work or worried about the security of their jobs that price really matters when they’re doing their shopping.

“We face a divided nation where those who remained in work throughout the pandemic could have extra spare cash to fuel a big spending spree versus those are even worse off and it’s the latter group that may well make B&M one of their retailers of choice.”