Variety discounter B&M European Value has upgraded its full-year profit forecast after a strong third quarter and will pay a £200mn special dividend next month.
The FTSE 100 company, which trades from more than 700 stores in the UK and 113 in France, said adjusted earnings before interest, tax, depreciation and amortisation would be between £560mn and £580mn in the year to March. Analysts had forecast an average of £557mn, it added.
The retailer will pay a 20p a share special dividend — or a total of £200mn — in February under a longstanding capital allocation policy that returns surplus funds to shareholders.
Sales in the 13 weeks to December 24 were up 12.3 per cent to £1.57bn, with UK sales rising 10.4 per cent. Same-store sales in the UK, which strip out the impact of new store openings, rose 6.4 per cent.
At the Heron chain of cut-price convenience stores, acquired in 2017, sales were up 22 per cent, while revenues in France, where the company has been converting acquired Babou stores into the B&M format, were up 24.9 per cent.
Shares in the group were up a relatively modest 1.3 per cent in early trade, and several analysts pointed out that midpoint of the revised guidance was actually slightly lower than the previous range.
RBC analyst Richard Chamberlain said this was “likely due to margin pressure” and predicted that the company would continue to face margin headwinds from dollar strength and rising wage costs.
Chief executive Alex Russo responded that there was still “work to do” over the final quarter of its financial year, but he was confident the company was taking market share from more expensive operators.
“When we get the price right, get the stock flow at the right time and the quality of product right, the consumer is reacting to that,” he said, adding that transaction numbers had been consistently positive year on year since the second quarter.
The strong third quarter comes after a tricky period for the company, which had to navigate a moderation in consumer demand following a boom during the coronavirus pandemic.
It also had to contend with the retirement of Simon Arora, the former chief executive widely credited with transforming the company from a handful of stores in north-west England to a nationwide discount chain.
Arora handed over to Russo in September, though his brother Bobby remains with the business and the family still owns about 7 per cent of the shares.
B&M’s figures reinforce recent data showing that many Britons chose to shop at cheaper outlets over the festive period, as rising costs and a strong dollar pushed up selling prices of everything from food to homewares.
The group sells a core range of consumer goods, stationery, toys and food, plus highly seasonal offerings such as gardening, DIY and Christmas products.
The British Retail Consortium said on Wednesday that annual growth of UK food prices hit 13.3 per cent in December — the highest reading since the trade body’s records began in 2005.
Aldi, the hard discounter, earlier this week said its sales during December were 26 per cent higher than in 2021.