B&M European Value Retail S.A. (LSE: BME) shares collapsed by 22.75% on October 20, 2025, after the FTSE 250-listed discount retailer downgraded its full-year FY26 earnings guidance for a second time in two weeks and confirmed the resignation of Chief Financial Officer Mike Schmidt. The update followed the discovery of a £7 million overseas freight cost misstatement, linked to a system implementation issue that caused material errors in cost-of-goods-sold recognition during the first half.
The sharp selloff, which sent the stock down by GBX 49.40 to close at GBX 167.70, marked the steepest one-day decline in recent years and dragged B&M shares to their lowest levels since 2022. Total market turnover on the day topped £42 million on a volume spike of more than 49 million shares. The stock has now declined over 57% from its 52-week high of GBX 394.35, with the company’s market capitalisation dropping to approximately £2.18 billion.
Why did B&M European Value Retail revise its FY26 earnings forecast just two weeks after the last update?
B&M European Value Retail S.A. revealed that its ongoing half-year results consolidation uncovered £7 million in overseas freight costs that were not appropriately recognised as cost of goods sold due to a system update earlier in 2025. While the underlying IT issue has been resolved, the impact on EBITDA was significant enough to warrant an immediate adjustment to the Group’s FY26 outlook.
Group adjusted EBITDA (pre-IFRS 16) is now projected in the range of £470 million to £520 million for FY26, revised down from the previous range of £510 million to £560 million provided in the October 7 update. First-half adjusted EBITDA is now expected to be £191 million, compared to previous guidance of £198 million and sharply lower than the £274 million recorded in the same period last year.
The Board has authorised a comprehensive third-party review into the matter to determine the full scope of the system-related error and recommend any structural or control improvements.
What are the implications of the CFO resignation and how is leadership transition being managed?
Chief Financial Officer Mike Schmidt has informed the Board of his intention to step down from his role following the disclosure of the accounting issue. A formal search process for his successor has commenced. Schmidt will remain in his position until a replacement is found to ensure a smooth transition. The resignation, occurring in parallel with operational underperformance and earnings downgrades, has raised questions about leadership stability and internal risk management controls.
Investors and analysts have reacted with concern, as CFO transitions during periods of financial volatility often signal broader internal challenges. While B&M has committed to restoring transparency through external review, confidence in the Group’s oversight mechanisms has been shaken.
How has B&M UK performed operationally and what changes are being made through the turnaround strategy?
Chief Executive Officer Tjeerd Jegen, who took over in June 2025, has rolled out a comprehensive operational reset under the banner “Back to B&M Basics.” The strategy is focused on rebuilding core retail execution following a series of internal reviews that found the UK business was underperforming due to inconsistent pricing, SKU proliferation, and subpar on-shelf product availability.
In the first half of FY26, Group revenue rose 4% year-on-year to £2.75 billion, with B&M UK contributing £2.19 billion. However, B&M UK like-for-like sales were flat at +0.1% for the half, and declined by 1.1% in Q2 alone. Performance in May and June was especially weak due to weather-driven fluctuations and poor demand for outdoor seasonal ranges.
To address these issues, B&M European Value Retail S.A. implemented several key operational changes. These included lowering prices on 35% of its fast-moving consumer goods Key Value Items to improve consistency in customer pricing perception. Manager’s Specials promotional bays have been rebooted to enable localised merchandising, with strong trading reported for the recent Back-to-School and Halloween events.
The company is also rationalising its range by reducing SKU counts in categories such as toys, home accessories, and FMCG. Additionally, internal audits revealed that shelf availability in key FMCG lines was only 86% versus industry best-practice levels of 98%. The company acknowledged that it had prioritised the appearance of shelf fullness over actual product availability and has now reoriented replenishment processes accordingly.
What role are the France and Heron Foods businesses playing in stabilising overall group performance?
B&M France continued to deliver strong results in H1 FY26, with revenue up 13.4% to £280 million and like-for-like sales growing 5.2%. The company opened five new stores in France during the period, reinforcing its view that the French market represents a meaningful long-term growth opportunity for the Group’s discount retail format.
Heron Foods, which includes both Heron and B&M Express fascia stores, saw revenues decline 0.9% year-on-year to £273 million. Management has acknowledged that Heron is facing similar operational challenges as B&M UK, and has started implementing turnaround initiatives that mirror those in the UK business. Despite the sales decline, Heron Foods remained profitable in the period and opened three new stores (one net) in H1.
What are the financial pressures affecting EBITDA and how is B&M managing cost headwinds?
In addition to the freight accounting issue, B&M European Value Retail S.A. faced multiple external and structural cost pressures during the first half of FY26. The Group absorbed £14 million in annual Extended Producer Responsibility tax costs, recognised fully in H1. It also reported £3 million in adverse FX hedge non-cash movements, which it expects to unwind in the second half of the fiscal year.
The rise in the UK’s national minimum wage and employer National Insurance contributions added approximately £30 million to the Group’s cost base in H1 FY26. While some of these pressures were offset through pricing adjustments and margin management, the company acknowledged that higher operating costs continue to weigh on profitability.
The Group also noted that its leverage ratio, defined as net debt to adjusted EBITDA (pre-IFRS 16), will exceed its 1.0–1.5x target range temporarily due to lower earnings and seasonal working capital buildup in anticipation of Q3 and Q4 holiday trading.
What is the guidance for the rest of FY26 and how much depends on UK like-for-like sales recovery?
B&M European Value Retail S.A. reiterated that its full-year FY26 earnings outcome will be primarily driven by B&M UK’s like-for-like sales trajectory in the second half. Management expects LFL sales in H2 to fall between low-single-digit negative and low-single-digit positive levels. This assumes some traction from the Back to B&M Basics initiatives, although the full financial impact is expected to materialise over a 12 to 18-month period.
While EBITDA margins are expected to remain under pressure in the near term, the company stated that with consistent LFL sales growth, it can restore profitability to low-double-digit margin levels over the medium term. This target assumes successful SKU simplification, pricing discipline, and executional gains across its UK store network.
What strategic developments are underway and when is the next major investor update expected?
B&M European Value Retail S.A. confirmed that its planned redomicile from Luxembourg to Jersey is progressing on schedule. The move is expected to complete within FY26 and is aimed at simplifying administrative processes and enabling greater flexibility for shareholder capital returns, including potential share buybacks subject to approval.
The company’s next major update is scheduled for November 13, 2025, when it will release its interim results. Investors are expected to focus on margin evolution, LFL sales trends, third-party audit outcomes, and CFO succession planning during the presentation.
For now, confidence in the Group’s short-term outlook remains fragile, as investors weigh the impact of accounting issues, leadership transitions, and patchy UK retail performance against the longer-term potential of the turnaround plan.
What are the most important takeaways from B&M’s profit warning, stock crash, and leadership changes?
- B&M European Value Retail S.A. (LSE: BME) shares plunged 22.75% on October 20, 2025, closing at GBX 167.70 after a second FY26 profit warning and the resignation of Chief Financial Officer Mike Schmidt.
- The company identified a £7 million overseas freight cost misstatement, caused by a system update earlier in the year that misallocated costs in its financial reporting.
- FY26 adjusted EBITDA (pre-IFRS 16) guidance was cut to £470 million–£520 million, down from the £510 million–£560 million range given just two weeks earlier.
- H1 FY26 adjusted EBITDA is now expected at £191 million, down from £274 million in H1 FY25, reflecting cost pressures, accounting errors, and underperformance in UK operations.
- B&M UK like-for-like sales declined by 1.1% in Q2, while B&M France delivered 13.4% revenue growth and 5.2% like-for-like sales growth, highlighting contrasting performance across regions.
- CEO Tjeerd Jegen launched a “Back to B&M Basics” turnaround strategy focusing on pricing discipline, SKU simplification, shelf availability, and revamping in-store promotions.
- Heron Foods remained profitable but saw a 0.9% sales decline, with operational reform efforts now underway similar to B&M UK.
- Additional financial pressure came from £14 million in EPR taxes, £30 million in wage-related costs, and £3 million in FX hedge losses, all recorded in the first half.
- Leverage ratio is expected to temporarily rise above the 1.0–1.5x target range, driven by lower earnings and seasonal inventory buildup.
- The company’s redomicile to Jersey remains on track for FY26, enabling greater flexibility for future share buybacks and capital returns.
- A third-party review of the accounting issue has been commissioned, and a successor to CFO Mike Schmidt is being actively sought.
- The next investor update will come with the interim results scheduled for November 13, 2025, where further clarity is expected on margins, turnaround execution, and leadership transition.
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