Shares in B&M fell more than 19% on Monday after the UK discount retailer admitted a £7 million accounting error that will hit its earnings and trigger a leadership change.
The company said that overseas freight costs were not correctly recognized in its accounts following an operating system update earlier this year.
The issue, which has now been fixed, will be subject to an independent third-party review commissioned by the board.
However, the error has forced B&M to revise its earnings outlook and left investors questioning the company’s financial controls.
Chief Financial Officer Mike Schmidt will step down but remain in his role until a successor is appointed, the company said.
Earnings outlook lowered amid investor unease
B&M now expects adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) for the first half of fiscal 2026 to total £191 million, below its previous estimate of £197 million.
That marks a sharp drop from £274 million in the same period last year.
Full-year adjusted Ebitda guidance was also cut to between £470 million and £520 million, down from a prior range of £510 million to £560 million.
The company reported £620 million in the previous fiscal year.
“While such system issues do happen, the concerns for us are that 1) it suggests that the company is less on top of its cost numbers than we would expect and 2) that the business is running at a lower gross margin than we thought,” analysts David Hughes and Clive Black write.
“This suggests that the road back to profitability will be longer as the company seeks to rebuild from a weaker position.”
The downgrade follows an earlier guidance cut on October 7, when B&M reported a 1.1% decline in second-quarter like-for-like UK sales.
CEO outlines turnaround strategy to regain momentum
New Chief Executive Tjeerd Jegen, who took the helm in June, said earlier this month that the company is undertaking a “Back to B&M Basics” plan to restore growth.
The initiative follows a comprehensive review identifying several operational weaknesses, including inconsistent pricing, poor shelf availability, and overly complex product ranges.
The turnaround plan aims to simplify the product mix, lower prices on key household items, and improve stock levels.
“We have more work to do, but we are confident these changes will restore consistent like-for-like sales growth over time,” Jegen said.
B&M expects the impact of its recovery efforts to unfold over the next 12 to 18 months.
Challenging retail landscape adds to pressure
British retailers continue to battle fragile consumer demand, rising wage costs following April’s minimum wage increase, and fierce competition in an increasingly promotional market.
B&M said first-quarter sales had benefited from early summer weather and Easter timing, boosting outdoor product sales.
However, those gains reversed in May, leading to a projected 28% drop in first-half core earnings to £198 million.
Despite difficulties in its home market, the company’s France division performed better, reporting a 5.2% rise in like-for-like sales during the half-year.
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