Variety discount group B&M has reported strong growth in revenues and profits in its H1 results for the 26 weeks to September 29. The retailer also provided new detail about its international expansion.
Group revenues: + 16.1% to £1.56bn (constant currency)
UK revenues: + 7.1%. Underlying like-for-likes (LFLs) +0.9% (adjusting for 53 week year and non-comparable Easter week, flat otherwise)
Profit before tax: +32.5% to £115.0m
Stores: 948 +6.2%, including 22 gross new B&M UK store openings (15 net)
Steady progress at core UK business
B&M is pleased with the performance of its core business. Though LFL was flat overall, the result is against a tough +7.5% comparative. Q2 LFL sales declined by 1.6% (cancelling out a 1.6% gain in Q1) but gross margins strengthened as seasonal stock sold through by mid July limiting the need for discounting. B&M also highlighted the strength of its grocery and FMCG proposition with shoppers attracted from mainstream supermarkets by particularly low prices on everyday items.
Looking ahead, B&M is on track to achieve its target of at least 58 gross store openings in the current financial year by taking advantage of increased site availability across the UK. Building work has also commenced on a 1m sq ft DC in Bedford capable of supporting a much bigger store network in the South of England from January 2020.
Growth at Heron
B&M reports that the 269 store Heron business has continued to trade well on a LFL basis. Ambient grocery is the main product category driver, and basket value is growing. A net 10 Heron stores will open over the next six months maintaining the run rate from H1. Future plans include a trial 'B&M Express' rebrand at 27 stores, a refresh of the frozen range over the next nine months and new Christmas "Party Fayre" ranges.
New management team accelerates change in Germany
Jawoll, B&M's German business, achieved a 4.1% sales increase driven by a modest LFL gain and the annualisation of FY18 store openings. The business is in transition with a new management team switching general merchandise sourcing to the B&M supply chain and undertaking clearance activity on discontinued lines. A new trial store using B&M branding will open in November 2018.
B&M has also outlined its initial plans for Babou Stores, the variety discounter it purchased from Paminvest SAS last month for €94.1m. Priorities include increasing direct sourcing from Asia to sharpen prices, creating more space for seasonal ranges, right sizing the clothing range and using FMCG to drive footfall at the 95-strong chain. B&M best practice and scale will also be leveraged and a new CEO has been appointed. Cédric Mahieu was a buying director at La Foir Fouille and previously led non-food imports from Asia at Auchan.
For our latest insight on the discount channel, see UK discount: factors influencing growth