Shares in B&M European Value retail slumped on Monday as an accounting blip forced another profit warning and the departure of its chief financial officer.
At 184.1p, B&M shares were last 15% lower in start-of-week business. They were dealing at their cheapest since October 2016 earlier in the session.
The FTSE 250 company said its half-year results consolidation process “has identified… approximately £7 million of overseas freight costs not correctly recognized in cost of goods sold, following an operating system update earlier this year.”
B&M said that the underlying cause of the issue had been resolved, but added that it would have a “material” impact on full-year numbers.
As a consequence, the retailer slashed its adjusted EBITDA forecasts to between £470 million and £520 million.
Corresponding EBITDA of between £510 million and £560 million had previously been predicted after a forecast downgrade on 7 October. Earnings had been tipped at £620 million at the start of the month.
For the first half, adjusted EBITDA of £191 million is now anticipated versus a previous forecast of £198 million.
Heads Roll
Following the error, B&M said its chief financial officer Mike Schmidt plans to vacate his position at the retailer. He has held the role since October 2022, following an eight-year stint at furniture retailer DFS.
Schmidt had briefly held the role of interim chief executive officer following the departure of Alex Russo in April.
The retailer said that “a search for his successor has commenced and Mike Schmidt will remain with the company until a replacement is in place to ensure an orderly transition.”
Schmidt’s departure marks the company’s latest high-profile exit after Russo called an end to his four-year tenure as chief executive in February. Retail industry veteran Tjeerd Jegen took over the position in June.
B&M will provide an update on the accounting issue when interim results are released on 13 November, it said.
Reduced Sales Expectations Confirmed
B&M also affirmed its expectations for like-for-like UK sales at its core operations to drop “between low-single-digit negative and low-single-digit positive levels” during the second half.
It added that it continues to expect B&M UK like-for-like sales and adjusted EBITDA margins to stabilize at low-double-digit percentage levels over the medium term.
Monday’s profit warning is the second in as many weeks after B&M’s disappointing half-year update on 7 October.
First-half like-for-like sales rose just 0.1% at its B&M UK division, it said then. Corresponding revenues slipped 1.1% in the second quarter, which B&M commented was “weaker than our expectations.”
The retailer said that positive like-for-like volume and value growth in general merchandise was offset by declining fast-moving consumer goods sales during the first half.
Work To Do
Analyst Richard Chamberlain of RBC Capital has said that B&M “should benefit from consumers remaining value conscious and should have some runway for growth given it has only 2% share of UK retail overall.”
He also said the business has a strong track record on buying and benefits from tight cost control.
However, he added that “recent like-for-like trends have been subdued and we think B&M still needs to convince in terms of value for money perception and price competitive, what its sustainable margin level should be, and earnings visibility and reliability.”