B&M European Value Retail Shares Plunge: Faces Headwinds as ‘Back to Basics’ Plan Takes Centre Stage

B&M European Value Retail S.A. (LON: BME) is navigating a challenging period, marked by a drop in first-half earnings and the implementation of a strategic overhaul.

The discount retailer's FY26 H1 trading update reveals a need for operational improvements to reignite growth. The company's share price has plunged more than 16% in early Tuesday trading.

The Group's adjusted EBITDA (pre-IFRS 16) for the first half of FY26 is expected to be approximately £198 million, a sharp decline from £274 million in the same period last year.

This downturn reflects weaker-than-anticipated like-for-like (LFL) sales in the UK and squeezed gross margins.

Revenue saw a modest increase of 4.0% to £2.75 billion, driven by growth in B&M UK and France, alongside the addition of new stores. However, B&M UK's LFL sales growth was a mere +0.1%, masking underlying weaknesses in operational execution.

A key factor impacting performance was a -1.1% decline in B&M UK's LFL sales during the second quarter, falling short of internal expectations. This prompted a comprehensive review led by CEO Tjeerd Jegen.

To address these challenges, B&M is launching “Back to B&M Basics,” a plan focused on revitalizing the UK business and returning it to sustainable LFL growth.

Key initiatives include sharper pricing on Key Value Items (KVIs), a reboot of “Manager Specials” promotions, range refocusing to reduce complexity, and improved on-shelf availability.

Adjusting prices on FMCG Key Value Items (‘KVIs') to sharpen our customer value proposition has seen the company cut prices on 35% of our KVIs, lowering the average KVI line price by 1.8%.

Despite the headwinds in the UK, B&M France continues to perform well, with LFL sales growth of 5.2% in H1, demonstrating the strength of the B&M value proposition in that market. Heron Foods, however, experienced a slight decline in revenue, prompting similar operational improvement initiatives.

The company anticipates Group adjusted EBITDA (pre-IFRS 16) for the full year to be in the range of £510m-£560m. This outlook hinges on an improving LFL trajectory in the second half, with B&M UK's performance being the primary driver.

The redomicile of B&M European Value Retail S.A. from Luxembourg to Jersey is progressing to plan. The redomicile will simplify our administrative processes and enable greater flexibility in returning capital to shareholders, including through share buybacks, subject to shareholder approval. The process is expected to complete in 2025.

Driver Breakdown:

• Operational Weaknesses: Inconsistent pricing, static promotions, complex ranges, and poor on-shelf availability impacted UK sales.
• External Factors: The timing of Easter and early good weather skewed demand, while rising wage costs and unfavorable FX hedges weighed on profitability.
• Strategic Initiatives: “Back to B&M Basics” aims to address operational issues and restore sustainable LFL sales growth in the UK.

CEO Tjeerd Jegen stated, “Since becoming CEO in June, I have led the business through a comprehensive review of our customer proposition and operations. We have concluded that while B&M's value proposition remains strong, our operational execution has been weak,” reinforcing the company’s focus on operational improvements.