Following a very successful trading year, we look at the success of B&M and what the future holds for the high street discounter.
Success in the UK
B&M was acquired by its current management team in 2004 who between 2012 and 2014 grew the company's revenues by an impressive 66.5% to £1,272m. In the UK there are 373 stores as of 29th March 2014 in town centres and out-of-town locations trading under both B&M Bargains and B&M Homestore formats. Trading in what it calls an 'attractive and structurally growing market' it owes part of its success to structural shift of the consumer to discount across sectors and strong support from manufacturers and landlords.
B&M to be valued at up to £2.9m
In its London share flotation, high street discounter B&M is to be valued up to £2.9m with the company understood to be setting the range for its IPO between 230p and 290p per share. When the discounter announced its intention to float, it was hoping for a stock market value of £2.5m
Almost half of shoppers now use high street discounters
With an average of 2.7m individual customer transactions per week yet minimal advertising, it seems B&M has a high level of customer advocacy and has benefited from word of mouth. The high street discounter does not rely on promotions nor does it operate a loyalty scheme. IGD's ShopperVista research shows that 48% of the UK population shopped in high street discounters in March 2014, compared to 36% in February 2012. Research also shows that 64% of high street shoppers shop there to buy brands cheaply, in contrast to food discounters where private label dominates the offer. Within its range, B&M offers a variety of non-grocery products and leading FMCG brands which we expect will become of increasing importance to future growth at B&M.
Future plans of 850 stores
B&M sees potential to grow up to 850 stores in the UK as 66% of the population is currently not within easy access of a B&M store. With a strong business model, and a direct sourcing process, B&M is on track to continue its success for which it will depend on its key strengths that include:
- Targeted brand-led grocery offer at eye-catching prices
- Non-grocery products at disruptive prices
- Focused number of SKUs - 5,500 live SKUs at any one time
- Multi-point pricing model providing more flexibility than pound stores
International plans begin in Germany
In Germany, B&M now trades under two fascias 'Jawoll' and 'Hafu' with a total of 49 large out of town stores. At the end of 2013, JA Woll reported revenues of€163m. B&M has its sights set on expanding in the rest of continental Europe, aiming to replicate the 20-year success of Dollar General in the USA which has more than 11,000 stores and revenues of over $17bn.
To read more about UK high street discounters, visit the Retail Analysis Discounter page here.