Jan 22 (Reuters) - Britain's B&M cut its adjusted core profit forecast for the year on Thursday, as the discount retailer invests in clearing out discounted products and reducing inventory under its
B&M Issues Second Profit Warning Amid Turnaround Strategy Challenges
B&M's Profit Warning and Turnaround Efforts
By Yamini Kalia
Jan 22 (Reuters) - Britain's B&M issued its second profit warning in three months on Thursday as CEO Tjeerd Jegen forges ahead with a turnaround strategy to clear out old stock at steep discounts and boost sales at the expense of margins.
The chain, which sells everything from garden furniture to toys and food, has struggled with profitability amid accounting errors, stiff competition and higher costs.
Impact of Heron Foods Acquisition
Its UK like-for-like (LFL) sales fell 0.6% in the third quarter partly due to weak performance from Heron Foods, the convenience and frozen food chain it bought in 2017, but outperformed an RBC forecast for a 2% decline.
Market Reactions and Future Expectations
There were signs of improvement with December LFL sales rising 3%, a trend B&M said continued in early January.
CEO's Strategy and Challenges Ahead
It now expects group adjusted core profit of 440 million to 475 million pounds ($591 million to $638 million) for the year ending March, versus 470 million to 520 million pounds expected earlier.
B&M shares fell as much as 5%, before reversing losses to trade marginally higher by 0950 GMT. They have lost about half their value in the past year.
TURNAROUND RISKS TAKING LONGER THAN EXPECTED
Jegen, who joined in May, has moved quickly to sharpen pricing, simplify B&M's product ranges and is mulling launching an online channel to capture social-media-driven shopping.
"We think the new CEO's strategy is credible with the main risk being that it takes longer to come through than B&M expects," RBC analyst Richard Chamberlain said in a note.
B&M is also reviewing Heron Foods, which has been hit by weak footfall, lease pressures and store closures.
Panmure Liberum's Ben Hunt said the recovery depends on whether B&M can fund the price cuts by raising prices on its higher-margin general merchandise.
"There are at least some positives to take away from the improved LFL exit rate," said Jefferies analyst Andrew Wade.
($1 = 0.7449 pounds)
(Reporting by Yamini Kalia in Bengaluru; Editing by Subhranshu Sahu, Mark Potter and Joe Bavier)
