Consumers continue to prioritise cost when shopping, meaning discount brands are now performing extremely strongly in the UK. This has particularly benefited Liverpool based discount chain B&M Bargains, which has just revealed an extremely strong first half report.
In the 26 weeks to the 27th of September, turnover rose by 29.7 per cent while adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) climbed by an impressive 34 per cent to £73 million. However, finance costs contributed to a widening half year loss, which now stands at £16.45 million compared to £8.13 million during the same period last year.
These costs were partly due to the acquisition of an 80 per cent stake in German based Jawoll – a purchase which is already beginning to bear fruit, having contributed £58.8 million of revenues to the firm’s balance sheet so far. Another sizeable cost was the flotation of B&M on the stock exchange in June, which necessitated a spend of £58.2 million.
As a result of this extremely encouraging performance, B&M has made the decision to proceed with its aggressive store opening policy. During the period it opened a total of 20 stores, bringing its total store number to 393, and intends to open a further 30 stores in the second half to bring net openings to 50 for the current financial year.
Chief executive Simon Arora confirmed that widespread job creation would be a key aspect of the firm’s current strategy.
He said; “I am delighted to report that our maiden first half results are in line with expectations for both our UK and our German retail businesses.
“We remain very pleased with our new store programme, which is delivering healthy earnings growth and exceptional returns on capital.
“This financial year we plan to create 2,500 new jobs in the UK – we remain confident that we can increase our store base from 400 stores to our stated goal of 850 stores in the UK.”
Although new store openings remain very much at the forefront of B&M’s current strategy, it has recognised the need for a strong supply chain and as a result commissioned a 500,000 square foot distribution facility at its existing base in Speke, Liverpool. This new asset is already open for business, and initial reports indicate that it is contributing strongly to group profits.
In terms of new openings, it is currently believed that B&M executives are in discussions with the Home Retail group regarding a potential buyout of Homebase. As a number of Homebase stores are due to close in the coming months, this could potentially see B&M increase its store portfolio over and above its stated expectations if the rumours turn out to be true.
Chairman Sir Terry Leahy believes the firm stands to capitalise on the growing discount market, saying; “The business is well-positioned as the leading limited assortment general merchandise discounter in a growth sector which offers scope for it to at least double in size in the UK alone over the next few years. We are making good progress towards that objective.”
