B&M shares dive as German unit put under review
Shares in B&M fell more than seven per cent this morning as the bargain retailer launched a strategic review of its German business Jawoll to determine the future of the poorly performing unit.
The figures
The company’s overall pre-tax profit plunged 70 per cent to £32.2m in the first half, after its balance sheet was hit with a £59.5m impairment charge relating to the Jawoll business.
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Group revenue increased 12.3 per cent to £1.75bn in the 26 weeks to 29 September, driven by strong growth of 13.8 per cent in B&M’s UK business.
Earnings per share were 1.5p, a drop of 83.1 per cent compared to the previous year.
Why it is interesting
The group’s German business was affected by product availability issues and the late arrival of seasonal stock.
The unit reported revenue growth of 3.2 per cent, driven by the opening of 88 new stores, but operational issues negatively affected like-for-like sales. Third-party warehouse and logistics issues also impacted the retailer.
Russ Mould, investment director at AJ Bell, said: “It looks like poor management decisions with product availability issues, late arrival to stores of seasonal stock and huge markdowns to clear old stock.
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“There have also been large costs incurred on third party warehousing and logistics.
“This looks like a business which has taken its eye off the ball and today’s sharp share price decline is investors’ way of expressing dismay with the performance.
“B&M has another overseas operation in France which it acquired a year ago. Investors will hope that B&M doesn’t also mess things up with these operations like it has done with Jawoll.”
What B&M said
Simon Aurora, B&M chief executive, said “In Europe, we have seen contrasting performances from Babou in France and Jawoll in Germany.
“Babou has made good progress with the planned changes to its product offer. The performance of Jawoll has continued to be impacted by trading and operational issues and its financial performance remains disappointing.
“The board is carrying out a strategic review of Jawoll in order to determine its future.
“We are well placed for the golden quarter in our main B&M UK stores business.
“Despite the continued uncertainty in the economic environment generally, we are very proud to say that each of the top five store opening days in our history have all been in stores we have opened in the last 12 months.”