B&M, the variety discounter that entered the FTSE 100 index this month, has upgraded profit forecasts for the second time this year as customers spent more on each visit.
Group revenue in the six months to September 26 was up 25.3 per cent and in the UK, its most important market, it was still up 19.1 per cent as the third quarter began.
As a result, B&M now expects underlying half-year profit to be about £285m, above a previous range of £250m to £270m and above analyst forecasts.
“Our business model is proving well attuned to the evolving needs of customers, given our combination of everyday value across a broad range of product categories being sold at convenient out-of-town locations,” said chief executive Simon Arora.
The company’s stores — which specialise in categories such as toys, stationery, DIY, homeware, long-life foods and personal goods — are increasingly out of town. During the first half of the year, nine new stores were opened that mostly replaced eight smaller in-town stores. It also opened six new Heron Foods convenience stores.
B&M said that “as a result of pick-up in leasing activity” it now expects to open 40 to 45 new stores this year. It had previously expected to open about 30, mostly towards the end of its financial year.
UK same-store sales were up 23 per cent in the first half. At Babou, the French discounter acquired in 2018, sales grew and B&M expects a “small positive ebitda out-turn” for the half-year. Roughly 37 of its 101 stores now trade under the B&M brand.
The group’s shares were up 3 per cent in early trade on Tuesday. Adam Cochrane, general retail analyst at Citigroup, said it was possible that the company would upgrade forecasts again in the second half of the year because the costs of complying with Covid-19 were likely to have been lower than previously expected.
B&M has not issued earnings guidance for the full year, but Mr Cochrane said he now expected full-year pre-tax profit of £423m rather than £375m. Last year the company made £260m.
Discounters such as B&M — along with privately owned rivals Home Bargains, Wilko and Poundstretcher — were allowed to remain open during the UK’s 12-week lockdown because they sell a limited range of food.
Since lockdown ended, B&M, Home Bargains and Poundstretcher have also benefited from a heavy out-of-town presence. Shoppers have preferred retail parks, with lots of open space and plentiful free car parking, over indoor shopping centres and high streets.
Discounters have also tended to do well during economic downturns as customers seek out better value. Dedicated sourcing teams in Asia and a lean operating model mean they can often undercut chains such as Boots, B&Q and Argos on products such as toiletries, homeware and toys.