Budget retailer B&M European Value Retail has revealed another slump in sales against a year earlier, when trade was boosted amid Covid restrictions.
The chain said like-for-like sales tumbled 9.1% across its 705 UK stores in the quarter to June 25 – falling as much as 19.1% in the first five weeks as it came up against tough comparatives from a year ago.
It said the sales declines pared back to 1.6% in the following eight weeks and the group stuck by its full-year forecasts for underlying earnings of between £550 million and £600 million.
B&M, which also owns 311 Heron Foods shops and has 109 stores across France, said total group sales fell 2.2% to £1.2 billion in the quarter on a constant currency basis.
It comes after the firm’s annual results in May showing group revenues declined by 2.7% to £4.67 billion in the year to March 26, while profits stayed roughly flat at £525 million.
Analysts at Jefferies said it was unclear how much B&M would benefit from the shopper switch to budget brands amid the cost-of-living crisis.
James Grzinic at Jefferies said: “The more than 30% spike in European gas prices, which will start feeding through from October into augmented utilities bills, and the 12% jump in UK petrol prices of the past four weeks talks to another major squeeze in consumers’ ability to spend.
“The support measures announced by the UK Government will help dampen the blow.
“But the extent to which food trading down gains can offset a very constrained core B&M customer base is not that clear at this stage.”
B&M said that on a two-year comparison, which strips out the unusually strong trading from April 2021, UK same store sales fell by a less steep 4.4% and total group revenues rose 3.1%.
The figures follow its recent annual report revealing that outgoing B&M boss Simon Arora was paid £5 million last year, up from £3.7 million the previous year and a bigger pay packet than the chief executive of Tesco.
While the group benefited from lockdowns, by being allowed to remain open as it was classed as an essential retailer, it has since seen trading ease back.
Bosses have warned the outlook for the business is uncertain with the impact of soaring inflation on product prices and consumer spending yet to be felt.
Mr Arora said in May that shoppers tightening their belts could impact sales but may also lead to a rise in new customers looking for lower-priced products.
Mr Arora is set to be succeeded by finance boss Alex Russo at the helm, although a date has yet to be confirmed.
The billionaire who rapidly grew the chain announced in April that he would step down from the top role next year.
During his 17 years running B&M, which he bought with his brother Bobby in 2004, the businessman has turned the discount retailer into a FTSE 100 giant, with 1,125 stores across the UK and France.