B&M European Value Retail H2 Earnings Call Highlights

Key Points

• B&M posted a tougher fiscal 2026 with lower profits and margin pressure from pricing investment, clearance activity and cost inflation, though adjusted EBITDA landed at the midpoint of guidance and leverage returned to the target range.
• Cash generation remained strong, with post-tax free cash flow rising to GBP 321 million and net debt falling, supporting a final dividend and giving the company flexibility for investment, buybacks or other shareholder returns.
• France stood out as a key growth engine, delivering positive like-for-like sales all year, 13.4% revenue growth and higher profitability, while management sees substantial room for further store expansion there.

B&M European Value Retail LON: BME reported a difficult fiscal 2026 marked by lower profits, margin pressure and cost inflation, but management said stronger cash generation and reduced leverage give the discount retailer flexibility to invest in growth and its existing store estate.

Chief Executive Officer Tjeerd Jegen said adjusted EBITDA came in at “the midpoint” of current guidance at GBP 459 million, while leverage returned to the company’s target range at 1.4 times. He said that provided “a good foundation for driving future growth and, over time, shareholder returns.”

Interim Chief Financial Officer Peter Waterhouse said group revenue rose 3.6%, driven by store expansion, while like-for-like sales in B&M’s U.K. business were flat. Profit before tax was GBP 284 million, and adjusted EBITDA was down significantly from the prior year because of trading margin pressure and higher operating costs.

“It’s been a tough year in relation to profitability with margin cost line pressures,” Waterhouse said. “However, we’ve had robust cash flow, healthy leverage, and that drives investment flexibility for the future.”

Margins Hit by Price Investment, Clearance and Cost Inflation

Waterhouse said the year’s profit decline reflected two main pressures: weaker trading margins and increased operating costs. In FMCG, B&M deliberately invested in pricing to sharpen its value proposition on key lines, a strategy the company had flagged in its third-quarter trading update. In general merchandise, margins were affected by bought-in margin pressure and clearance activity, though Waterhouse said both areas should ease in fiscal 2027.

Operating costs were also a major drag. Waterhouse said statutory changes, including National Insurance, National Minimum Wage and the new Extended Producer Responsibility tax, represented GBP 66 million of headwinds that were “not sufficiently mitigated” in fiscal 2026. He said those pressures are expected to be materially reduced in fiscal 2027, while management is taking targeted action through its “Back to B&M Basics” program to improve cost control.

Despite the profit decline, Waterhouse said post-tax free cash flow rose GBP 10 million from last year to GBP 321 million. He attributed the result partly to working capital discipline, including lower inventory levels and clearance activity. Net debt fell, and leverage returned to the company’s target range of 1.0 to 1.5 times.

The board proposed a final dividend of GBP 0.061 per share, bringing the total ordinary dividend for the year to GBP 0.096 per share. Waterhouse said that was consistent with the company’s capital allocation policy range of 40% to 50%.

France Remains a Standout Performer

Management repeatedly highlighted the performance of B&M France, which delivered positive like-for-like sales in every quarter. Waterhouse said sales in France grew 13.4%, adding GBP 73 million to group revenue. Profitability rose 11.8%, from GBP 48 million to GBP 53 million, even as the profit margin dipped slightly because of planned investment in distribution center infrastructure.

Jegen said the French business is attracting more customers, gaining market share and now has 150 stores. He said the French market is similar in scale to the U.K. market by population, leaving “a good runway for expansion.” Current trading in France started fiscal 2027 positively, with higher footfall and continued market share gains, he added.

In a later question-and-answer exchange, Jegen said B&M France has executed consistently and has adapted its offer to compete effectively in that market. He said the business matches key value items against a major French competitor while using its larger stores to offer greater range depth and a more engaging shopping environment.

Back to B&M Basics Advances

Jegen said the company is “progressing at pace” with Back to B&M Basics, a program focused on pricing, range, availability and execution. He said B&M now has a more disciplined approach to price benchmarking and remains highly competitive. According to Jegen, 96% of benchmarked lines were priced the same as or lower than the company’s closest U.K. competitor, and 90% were equal to or lower than key supermarket competitors, with an average discount of 15%.

The next phase, he said, is improving price perception in stores, including stronger price messaging and better use of front-of-store space. B&M plans to double front-of-store space in hundreds of stores over the summer to increase customer engagement.

On range simplification, Jegen said B&M ran pilots across seven categories for six months. Six of the seven produced positive sales outcomes with lower SKU counts and higher sales. The company began rolling out SKU reductions last week and expects customers to see a 20% to 25% reduction in items on shelves, making stores easier to shop and reducing complexity for store and supply chain teams.

Availability has also improved. Jegen said availability of the top 250 best-selling SKUs rose from 86% to about 95% last week, with a goal to improve further during the year. The company is also introducing store-specific availability alerts for key items with stock records but no sales.

More Balanced Store Investment Planned

Jegen said B&M has begun phase two of its plan, which is focused on “deepening our foundations” by balancing new-store growth with investment in the existing estate. The company has grouped stores into six customer clusters and is using data to tailor range and format decisions.

Three workstreams are under way: relaying space in existing stores without store-fabric investment, refitting selected stores with improvements to layout, lighting, flooring and colleague areas, and developing a new “Store 2.0” concept inspired by the French business. The first Store 2.0 location is expected to open at the end of the second quarter.

B&M is targeting 25 to 35 gross new U.K. stores in fiscal 2027. Jegen said that reflects the company’s organic growth rate after recent years benefited from distressed opportunities, including Wilko and Homebase sites. He emphasized “quality over quantity” in new store decisions and said closures are expected to be at a similar level to last year.

Current Trading and Capital Returns

Jegen said B&M U.K. saw a slower start to seasonal trading in fiscal 2027, partly because April was difficult to compare with a strong prior year and because the business has nearly 300 garden centers, making the quarter weather-sensitive. He said trading improved in recent weeks as weather turned more favorable. France and Heron Foods both started the year positively, he said.

On Heron Foods, Jegen said a strategic review found “significant opportunities” to improve the customer proposition, including food-to-go, coffee, meal deals and other convenience-store offerings. He said Heron also has stepped up efforts to secure clearance parcels and has started the year with positive like-for-like sales.

Waterhouse said B&M’s cash generation gives it capital allocation options, including investment in the business, ordinary dividends, potential opportunistic M&A and additional shareholder returns. He said M&A is not currently a priority, while share buybacks are now possible following completion of the company’s redomicile process. Any decision on additional returns is likely after the golden quarter in January 2027, consistent with the company’s seasonal cash profile.

About B&M European Value Retail LON: BME

B&M European Value Retail SA operates general merchandise and grocery stores. The company operates a chain of stores under the B&M, Heron Foods, and B&M Express in the United Kingdom; and stores under the B&M brand in France. It also provides property management services. The company was founded in 1978 and is based in Munsbach, Luxembourg.

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