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Accounting

B&M Cuts Profit Guidance for Second Time in a Month Amid Financial Mistakes

Strategic Insights

— 2 min read

B&M, a discount retail firm, has slashed its profit guidance for the second time in a month after discovering an extra £7 million in costs that were not properly accounted for. The firm's finance chief, Mike Schmidt, also announced his surprise decision to step down from the business. The company attributed the mistake to an operating system update earlier this year, which has been resolved but will have a significant impact on its results this year.

Key Takeaways:

  • B&M has reduced its profit guidance for the second time in a month, citing an additional £7 million in costs that were not correctly recognized in its cost of goods sold.
  • The firm's finance chief, Mike Schmidt, plans to step down from the business after the company launched a comprehensive "third-party review" into the incident.
  • Adjusted earnings for the half year to September are expected to be around £191 million, down from the previous estimate of £198 million.
  • Group adjusted earnings are now expected to be between £470 million and £520 million for the financial year, compared to the previous guidance of £510 million to £560 million.
  • The firm still expects like-for-like sales growth to be between low single-digit negative and low single-digit positive levels over the second half of the year.
  • B&M was also impacted by a £30 million jump in wage costs and a £14 million hit in packaging taxes over the latest half-year.
  • The company has launched a series of turnaround measures, including cutting prices of some of its key value items.
  • Mike Schmidt will stay on until a new finance boss is appointed.

Statistics:

  • £7 million: The amount of extra costs that were not properly accounted for by B&M.
  • £191 million: The expected adjusted earnings for the half year to September.
  • £198 million: The previous estimate of expected adjusted earnings for the half year to September.
  • £470 million-£520 million: The revised guidance for group adjusted earnings for the financial year.
  • £510 million-£560 million: The previous guidance for group adjusted earnings for the financial year.
  • 1.1%: The drop in UK like-for-like sales in the second quarter of the year.
  • £30 million: The jump in wage costs over the latest half-year.
  • £14 million: The hit in packaging taxes over the latest half-year.

Sources:

  • [1] The Telegraph, "B&M cuts profit guidance for second time in a month amid financial mistakes"
  • [2] Reuters, "B&M finance chief quits amid cost scandal"
  • [3] AJ Bell, "B&M's Financial Mistakes Raise Questions About Its Margins"

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