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Investing.com -- B&M European Value Retail on Tuesday raised its earnings outlook for fiscal 2025 after posting a better-than-expected trading update, helped by stronger sales in general merchandise and improved like-for-like performance in the UK and France, sending its shares up by over 3%.
The variety store company now expects adjusted EBITDA for the year to come in above the midpoint of its £605 million to £625 million guidance range, outperforming consensus estimates by around 2 percent. RBC Capital Markets said the update marks B&M’s first earnings upgrade in at least two years.
In the fourth quarter, UK like-for-like sales declined 1.8 percent from a year earlier, ahead of market expectations for a drop of 3 to 4 percent.
RBC said performance likely improved in the latter part of the quarter. In France, like-for-like sales rose 3.2 percent, exceeding the firm’s estimate of a 1 percent increase.
General Merchandise categories, including garden, toys, paint and stationery, recorded positive like-for-like growth, while fast-moving consumer goods remained negative on a like-for-like basis. However, total sales in FMCG were positive, supported by additional selling space.
B&M opened 45 gross new stores during the year, meeting guidance, and plans a similar number of openings in fiscal 2026. Expansion in France and across the Heron Foods banner is progressing as planned.
The company said gross margin in the UK remains “robust,” supported by total volume growth and stronger sales in higher-margin general merchandise. UK operating expenses rose 6 percent year over year.
Net debt to EBITDA stands at around 1.25 times, within B&M’s target range of 1 to 1.5 times. The company also confirmed that its redomiciling process is on track to complete by the end of the calendar year, which would enable it to resume share buybacks.
B&M said progress is being made on CEO succession and that an announcement is expected in the coming weeks.
RBC Capital Markets views B&M as a cost-disciplined, cash-generative retailer with strong store expansion momentum in the UK and France.
The improved like-for-like trend comes after a period of weakness and may reassure investors that the company’s value positioning remains intact. B&M trades at nine times projected 2025 earnings and offers a dividend yield of about 5 percent.
RBC said further improvement in like-for-like sales and the return of share buybacks could help drive earnings per share ahead of EBITDA and EBIT growth, supporting potential valuation upside. Comparable names in coverage include Kingfisher (LON:KGF), Dunelm and Next, which also have exposure to seasonal or outdoor categories.