B&M profits dips as environment remains challenging

 

 

Adam Vettese, market analyst for eToro says: “B&M is continuing to feel the pressure of the tougher consumer environment, as profits have dipped by a little over 13%, accompanied by a negative like-for-like sales trend of -3.6%. B&M offers consumers familiar brands at low prices but now also face stiff competition from other discounters, with multiple retailers competing hard for less disposable income out there under current macroeconomic conditions.

“The company can show revenue numbers which are growing, but this is coming primarily from stores that have just opened, which will get that initial surge in sales as shoppers flock to see what’s new in their area. This in itself can be papering over the cracks of the wider issues of margins, and profit coming under more pressure.

“Shares have been on a downward trajectory since the beginning of last year and are worth a little over half of what they were then. B&M may need to see consistency come back into their store network as a whole to convince investors of a turn around.”

 

Pennon Group losses now in deep water

 

Adam Vettese, market analyst at eToro says: “Pennon Group’s full-year results show a resilient yet strained performance amid regulatory and operational challenges. Revenue climbed 15.2% to £1,047.8 million, driven by tariff increases and newly acquired SES Water’s contribution, but a loss before tax of £72.7 million (vs. a £9.1 million loss in 2023/24) reflects soaring financing costs from record £652 million capital expenditure.

“Investments in water quality, storm overflow reduction, and Pennon Power’s solar projects align with Net Zero goals but weigh on profitability. Operationally, Pennon excels in affordability, with 100% of South West customers finding bills manageable, five years ahead of the industry’s water poverty target. However, the Brixham water incident, which involved parasites being found in the Devon water supply have hit the firm reputationally and may well still see further repercussions down the line as a result. Add to that a dividend cut and the investment case sees more risks appearing for less reward. High debt, regulatory scrutiny, and reduced income will temper enthusiasm, and this is evident when looking at the trajectory of shares.”

 

 

 

British American Tobacco expects to return to growth in the US, but only just 

 

 

Mark Crouch, market analyst at eToro says: “BATs investors don’t seem put off by the long-term global decline in smoking rates and are instead placing their faith in BAT’s transition to smokeless alternatives, BAT’s vaping brand, Vuse, is now the world’s number one vaping brand, while its Velo nicotine pouches have emerged as the fastest-growing segment within its New Category portfolio.

“Velo, which has gained significant traction among sports stars and celebrities, recently saw the launch of Velo Plus in the U.S. The rollout has been a resounding success, with BAT now expecting a return to both revenue and profit growth in the American market, a promising sign in its transformation strategy.

“Overall, the future for BAT looks increasingly underpinned by the popularity of its smoke-free alternatives. However, despite an attractive dividend, BATs share price has struggled to reach anywhere near its 2017 high. So it’s important not to overlook the scale of the challenge ahead for BAT. Combustible tobacco products still account for over 80% of BAT’s revenues, and the company’s ambition to become “smokeless” by 2035 raises questions about whether new categories can generate comparable returns.”



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