B&M warns of profit fall as inflation squeezes customers and retail sector

theguardian.com:

The discount retailer B&M has warned that its profits could drop as customers struggling amid the cost of living crisis opt for cheaper products.

It highlighted an “uncertain macroeconomic outlook” that could prompt customers to switch to cheaper products and made it hard to predict “the impact of inflation on sales volumes”.

Households in Britain are having to cope with a surge in inflation to its highest level in 40 years as consumer prices rise, particularly because of higher energy prices. That has left them with less money for discretionary spending and made investors nervous about the prospects for retailers.

B&M’s share price dropped by more than 11% on Tuesday morning, making it the biggest faller on the FTSE 100. The share price fell to its lowest level since June 2020, three months before B&M joined the FTSE 100.

B&M was one of the retail industry’s pandemic winners as it was allowed to stay open during lockdowns.

B&M on Tuesday said it expected customers to shift spending away from “more discretionary higher-margin” products such as gardening items and Christmas decorations in favour of essentials such as food and toiletries.

Discount retailers such as B&M are hoping that the impact will be cushioned as shoppers look for cheaper options than their competitors. However, Simon Arora, B&M’s major shareholder and outgoing chief executive, acknowledged the difficulties facing the industry.

Arora said: “The retail industry is facing inflationary pressures whilst our customers are having to cope with a significant increase in the cost of living, making spending behaviour in the year ahead difficult to predict.

“However, we have seen before that during such times customers will increasingly seek out value for money, and B&M