B&M and The Works Face Tough Christmas as UK Retail Struggles
The festive season proved challenging for British retailers, with discount chain B&M and value bookseller The Works both reporting disappointing trading results amid broader economic pressures.
Profit Warnings and Sales Declines
B&M, the FTSE 250 listed discount retailer, has revised its profit forecast downward following weaker than expected Christmas trading. The company now expects full-year profits to fall between £440 million and £475 million, a significant reduction from previous guidance of £470 million to £520 million. This adjustment represents a potential hit of up to £45 million to earnings.
Meanwhile, The Works reported a 4.2% decline in sales over the crucial Christmas quarter. While physical store sales showed modest growth of 1.2% on a like-for-like basis over the eleven weeks to last Sunday, online sales collapsed by half due to problems with a new delivery provider. This disappointing performance sent shares in the Aim-listed company plummeting by 20% in morning trading.
Broader Retail Landscape
The difficulties extend beyond these two retailers, reflecting wider challenges in the UK retail sector. Primark, the fashion retailer owned by Associated British Foods, reported falling like-for-like sales during the Christmas quarter, though revenues rose 1.5% to £3.5 billion due to price inflation. ABF had previously surprised markets with a profit warning this month, driven by poor performance in mainland Europe.
Not all retailers struggled equally. DIY chain Wickes reported stronger performance with revenues of £788 million in the six months to 27 December, representing a 6.3% year-on-year increase. This contrast highlights the uneven impact of economic pressures across different retail segments.
Consumer Confidence and Strategic Responses
Both B&M and The Works pointed to subdued consumer confidence as a significant factor in their disappointing results. Gavin Peck, chief executive of The Works, acknowledged the challenging consumer backdrop while emphasising continued positive response to the company's value proposition and new products.
B&M's Christmas difficulties follow a turbulent period for the retailer, which operates stores across the UK and Europe. The company has been attempting to reset its business since ousting its finance chief in October, following an error that led to two profit warnings within two weeks. Chief executive Tjeerd Jegen has implemented a back to basics strategy focused on reducing product range complexity, with expectations of renewed sales growth over the next 12-18 months.
Market Reactions and Economic Context
Shares in B&M fell 4% in early trading before recovering to close 0.3% lower, amid broader market relief following Donald Trump's decision to drop tariff threats against European countries. The mixed fortunes across the retail sector underscore the importance of the festive trading period, which represents the most crucial time of year for many retailers.
The challenging conditions reflect broader economic pressures facing UK consumers, including higher unemployment and rising prices. Even retailers that performed relatively well during the period have warned about the difficult environment, suggesting ongoing headwinds for the sector as it moves into the new year.
