B&M (BMELN; Ba1/BB+; Stable) 1Q (to June) Earnings Call

Earnings call comments were quiet positive with the LFL fall in UK sales downplayed while margins were touted as strong (implying no margin deleveraging). Equity analyst are tad pessimistic on headline optimism. Bonds are unch to cheap and we reiterate our value view on the 28s at €92/Z+230/6.2% on RV and BS discipline; it gives +50bps over even troubled Mobico 28s. No issue with the 30s but the OAS is much lower at +170 on the convexity to early calls. Next event risk is 4-months away (1H results on the 14th of Nov), which will come with explicit FY guidance.

• Still expects positive LFL growth this year (consensus UK +1.3%). On margins reiterates strength and says gross was unch to higher yoy and continues to target B&M UK operating in 10-12% EBTIDA range (was 12.6% last year).
• UK (LFL -3.5%) it's blaming on weather. Reminder B&M has a mix of general merchandise (including outdoor and garden) and supermarket FMCG - it has said roughly half/half split between the two in UK. Positive is it seems to have planned ahead with stocking for general merch and exited Q1 clean leaving no margin and markdown risk to clear inventory. It says removing weather it would have been flat on LFL and that footfall and transaction volumes were still up.
• France (LFL +9.6%) rose on IT efficiencies around warehouse management being completed. Small cares for us given small 10% of sales and planned new store growth has and continues to be lower than UK. It is flagging its 2nd major distribution centre in the country will be opening towards the end of FY26 (Early '26).
• It says General merchandise was slightly more than half the sales this qtr on relative strength. It is dialling up home category products on the back of it, mgmt adding "I don't see the competition on general merchandise particularly strong."
• Numbers quoted this morning are gross store openings. (UK +19, France +2). It closed 5 UK stores in the 1Q - mostly relocations - mgmt adding it generally closes 5-10/yr as it recycles them into more accretive locations. Confirms +45 in UK, +11 in France and +20 Heron store targets for the year.