LONDON (ShareCast) - (Sharecast News) - Shares in discount retailer B&M European Value Retail were down double-digits early on Tuesday after it posted weaker-than-expected revenue growth in Q1, despite soft comparatives and favourable weather conditions across the UK.
Group revenues were up 4.4% at £1.41bn, missing estimates of £1.43bn, with UK revenue growing 4.7% to £1.13bn and French revenues improving 7.6% to £136.0m. Revenue in its Heron Foods arm was down 0.4% at £138.0m.

B&M said it had delivered a "positive" like-for-like trading performance in the three months ended 28 June, with revenues improving in both its UK and French operations.UK like-for-like sales were up 1.3%, driven by a "good performance" in April from its general merchandise outdoor ranges, assisted by drier weather and the timing of the Easter break. B&M France LFL sales were up 1.1%.

B&M also noted that ASP deflation had led to a lower trading gross margin year-on-year in some general merchandise categories during Q1. However, it noted that from Q2, it will begin to annualise these ASP effects and new ranges being introduced will now have a higher bought-in trading gross margin.

"B&M has managed to disappoint again with UK LFL +1.3%, which is below the investor bar of 2-3%, and total sales growth of 4.7% implying a smaller space contribution than expected as well despite 18 gross (10 net) store openings. The Easter benefit was not quantified (which it was last year when it was a drag) and this likely put "underlying" LFL to flat at best and likely negative for May and June. General Merchandise was positive (helped by weather) but FMCG remained negative over the quarter," said Deutsche Bank.

"The weaker gross margin comments for 1Q is also a small negative surprise given this is an area that has been well managed. We wait for the call at 9AM to hear the new CEO and any thoughts on what is required to help LFL growth and specifically comments on price investment in FMCG. Overall, a disappointing print against a -5% UK comparative that has missed the consensus bar and despite c.9x Cal 25 PE we see shares down LSD-MSD% today."

As of 0830 BST, B&M shares were down 12.43% at 225.66p.



Reporting by Iain Gilbert at Sharecast.com

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