Discount retail giant B&M has issued a fresh profit warning, marking the third downward revision to its earnings forecast since October, as its strategic "back to basics" plan struggles to attract customers despite significant price reductions.
Financial Performance Under Pressure
The group reported a 0.6 per cent decline in UK like-for-like sales during the crucial quarter ending 27 December, though it noted an "encouraging" 3 per cent increase in December with this positive momentum extending into January. B&M has now revised its full-year underlying earnings forecast to between £440 million and £475 million, a significant reduction from earlier guidance of £470 million to £520 million and a substantial decrease from the £620 million in underlying earnings reported for the year to 29 March, 2025.
Market Reaction and Share Price Impact
Following Thursday's announcement, B&M's shares initially dropped by as much as 5 per cent in morning trading before recovering slightly to close more than 1 per cent down. The market reaction reflects investor concerns about the retailer's ongoing challenges in a competitive discount sector.
'Back to Basics' Strategy Implementation
The group's strategic overhaul, launched last October under the "back to basics" banner, has seen B&M sharpen its price offer with reductions across the board while significantly reducing its product range in numerous categories. These measures form part of broader efforts to simplify operations and reduce costs, but have yet to deliver the anticipated sales boost.
B&M stated: "The downward movement in range is driven by ongoing investments in pricing and clearance, improvements in stock quality and the financial underperformance of Heron Foods, where we continue to review and reposition our customer offer."
Heron Foods Underperformance
Sales at Heron Foods, B&M's subsidiary, fell 0.1 per cent over the latest quarter, contributing to the overall financial challenges. The company acknowledged it is actively reviewing and repositioning the Heron Foods customer offering to address this underperformance.
Stock Clearance and Future Outlook
B&M has ramped up efforts to reduce unwanted stock through substantial discounts, with the company expressing confidence that these actions can restore sustainable like-for-like growth at B&M UK over the next 12 to 18 months. The retailer emphasised these are strategic investments in long-term strength, despite their negative impact on near-term financial performance.
Tjeerd Jegen, who was appointed chief executive last year, commented: "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."
Accounting Issues Resolved
The group also addressed previous accounting difficulties, noting that its investigation into an October incident involving £7 million in unaccounted overseas freight costs is now complete. Implementation of the report's recommendations on specific IT and financial operational processes is currently underway, according to company statements.
The latest developments highlight the ongoing challenges facing discount retailers in the current economic climate, with B&M's experience demonstrating how even aggressive pricing strategies may struggle to overcome broader market pressures and changing consumer behaviour patterns.
