German subsidiary sends profits plunging at Liverpool-based retailer B&M

B&M operates 645 stores across the UK which enjoyed a 14% rise in sales to £1.5bn but poor sales at German retailer Jawoll caused profits to plummet 70% to £32.2m. Tony McDonough reports

B&M
Head office of retailer B&M in Speke, Liverpool

 

Liverpool-based national budget retailer B&M saw pre-tax profits plunge more than 70% to £32.2m in the half-year to September 29, 2019, thanks to the poor performance of its German subsidiary.

Jawoll, which in 2014 was B&M’s first overseas acquisition, operates 98 stores across Germany and was hit by problems with distribution and poor sales, resulting in an impairment charge of £59.5m.

However, even with the charge stripped out of the results, B&M’s performance still disappointed investors with pre-tax profit down 2.8% on the same period last year, falling from £98.8m to £96m, well below initial forecasts of £102m.

Group revenues were up 12.4% to almost £1.8bn, boosted by a strong performance in its core B&M branded UK retail business with 14% rise in sales to £1.5bn. The company, based at Speke in South Liverpool, operates 645 B&M outlets across the UK, an increase of 54 from a year earlier.

READ MORE: B&M increases imports through the Port of Liverpool

As well as the Jawoll stores, B&M also operates 99 Babou stores in France and 290 outlets under the Heron frozen food brand in the UK. In all, the group has 1,132 retail outlets.

B&M’s biggest UK rival is another Liverpool-based retailer, Home Bargains. With its headquarters in the north of the city, Home Bargains reported annual sales of £2.4bn in October and pre-tax profits of £233m. It said it was “hungry” to open new stores, aiming to double in size to around 1,000 outlets.

On Tuesday, B&M said it was on track to open 46 new B&M UK stores in the current financial year. Chief executive Simon Arora said: “We have delivered a solid overall first half performance driven by our core B&M UK stores business which constitutes 86% of group sales.

“Our existing stores performed consistently well through the last two quarters. The current crop of new stores also achieved especially strong results. The core business has made a solid start to the second half of the financial year.

“Heron Foods has continued to grow in the UK and we remain very pleased with the overall progress of that business. 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.”

B&M began with a single store in Blackpool in 1976. In 2005 Manchester brothers Simon and Bobby Arora, who ran a successful wholesale business, bought the chain from Private Equity firm Phildrew Ventures. The Aroras later relocated the business to Speke.

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