In Part 1 we cover what actually happened in FY26, why the market reacted the way it did, whether the turnaround is real, and what the strategy tells us about where this business is heading. Part 2, out soon for paid subscribers, gets into the valuation, the bull and bear cases, and whether at 211p there is still money to be made.
Dear reader,
If there’s one results day I genuinely look forward to every year, it’s B&M’s.
The numbers are always interesting. The story is never simple. And FY26 is no exception profits down sharply, margins under pressure, yet somehow the balance sheet is in better shape than it was twelve months ago.
So put the kettle on. This one’s worth your time.
B&M is one of those businesses that should, in theory, be untouchable. It sells branded goods cheaply to people watching every penny. In a cost-of-living crisis, that’s supposed to be a superpower.
FY26 proved it’s not quite that simple.
Revenue grew 3.6% to £5.8bn. But adjusted EBITDA fell from £620m to £459m a drop of 26%. Profits were nearly cut in half. The dividend went from 15p to 9.6p. For a business with B&M’s reputation, those are ugly numbers.
And yet the share price is up nearly 24% in five days, investors have clearly decided the worst is behind them.
Worth noting: B&M was relegated from the FTSE 100 to the FTSE 250 in December 2024, after shares fell sharply through the autumn. A business that was once a blue-chip staple is now rebuilding from the mid-caps.
What actually happened and why the market doesn't care
To understand why the share price is up 24% in five days on results this bad, you need to understand where B&M has come from.
In the space of four months, B&M issued three profit warnings, lost its CFO, and watched its share price fall more than 50% from its 52-week high of 321p. By the time results day arrived, expectations were buried. The bar wasn’t just low, it had been dug up and thrown away.
Adjusted EBITDA of £459m landed within the guided range of £440 to £475m and came in ahead of analyst estimates, and given that the company had issued three profit warnings in four months, delivering within guidance was in itself a meaningful credibility restoration for management.
After three profit warnings, the lowest bar in retail was simply: do what you said you’d do. On that measure at least, FY26 was a pass.
So what went wrong in the first place?
The presentation is admirably honest. CEO Tjeerd Jegen didn't dress it up. "FY26 was a difficult year that saw profits fall due to a challenging market and execution issues," he said.
Both matter. The market part, cost inflation driven by National Minimum Wage increases and employer National Insurance contributions adding £52m to the wage bill, was largely outside management’s control. The execution part wasn’t.
B&M let its grocery pricing drift uncompetitive. Stock availability slipped. Stores became cluttered with too many product lines. B&M is supposed to be the cheap and cheerful alternative to the big supermarkets. Letting prices drift and shelves run empty is about as basic as mistakes get.
The Numbers
Let's start with the headline. Adjusted EBITDA fell from £620m to £459m, a drop of £161m in a single year. For context, £161m is roughly what B&M France generates in profit across an entire year.
Revenues grew 3.6% to £5.8bn. But revenue growth without margin is just a bigger bucket with a bigger hole in it. B&M opened 41 new UK stores and kept expanding in France, and still couldn’t translate top line progress into anything resembling bottom line health.
The UK is where the story really lives. B&M UK revenues grew 2.9% to £4.6bn, but the EBITDA margin collapsed from 12.2% to 8.6%. To put that in simple terms, the business went from making around 12p of profit for every £1 of sales to less than 9p. That 360 basis point compression is the entire FY26 story in one number.
Two things drove it. Gross margins fell 150 basis points, hurt by weaker buying margins in general merchandise and deliberate price cuts in grocery lines. Costs rose sharply at the same time, with staff costs jumping from £628m to £690m, £52m of which came from government-mandated wage and National Insurance increases that B&M could neither avoid nor fully offset.
There were two genuine positives. Free cash flow improved from £311m to £321m, driven by tight working capital discipline. Net debt fell by £125m, bringing leverage to 1.4x, comfortably within the 1.0 to 1.5x target range.
The dividend was cut from 15p to 9.6p. Painful for income investors, but it sits within the stated 40-50% payout ratio. Management chose balance sheet discipline over optics.
Back to B&M Basics is it actually working?
Tjeerd Jegen joined as CEO in June 2025, inheriting a business that had lost its way. His diagnosis was simple. B&M had drifted from what made it great. Prices had crept up, shelves were cluttered, and the stores had lost their identity as the place to go for branded goods cheaply.
By November he was posting on LinkedIn about his first Golden Quarter Conference at B&M, describing it as a real highlight. It was a small but telling signal, a new CEO visibly energised rather than firefighting, trying to rebuild a culture as much as a business.
The plan he launched in October 2025 had three pillars. Sharper pricing on key grocery lines, a meaningful reduction in the number of products on shelf, and a drive to restore on-shelf availability of the brands customers actually want.
Six months in, the early signs are encouraging, though encouraging is doing a lot of heavy lifting there.
On pricing, B&M now checks its shelf prices every week against both discount rivals and the big supermarkets. The results showed B&M is cheaper or equal to a discounter on 96% of lines, and cheaper or equal to a major grocer on 90% of lines, up from 87% just a few months ago. For a discounter, price perception is everything. If customers think you are expensive, they stop coming, regardless of what the data says.
On range, B&M tested cutting the number of products on shelf across seven grocery categories. Six of the seven saw sales go up as a result. In rice and pasta, stocking 25% fewer products actually increased sales by around 3%. In confectionery, a 20% reduction drove roughly 4% more in sales. Less choice, more sales. It sounds counterintuitive, but simpler shelves are easier to shop, and easier to shop means more money through the till.
On availability, the numbers tell a clear story. The proportion of B&M’s top 250 best-selling branded products actually in stock on the shelf has jumped from 86% in the first half of FY26 to 95% today. As Jegen put it, these actions on everyday grocery and household product ranges, think branded cereals, cleaning products and soft drinks, are now moving out of their pilot phases and rolling out across all stores.
The sceptics have a point though. As Emily Scott, retail analyst at GlobalData, noted, “B&M’s FY2025/26 results highlight a retailer still searching for a sustainable path back to growth. While it has pointed to improving trends under its Back to Basics programme, which launched in October 2025, its financial performance still has a lot of catching up to do”
She is right. The UK LFL trend improved from minus 3.1% in FY25 to minus 0.1% in FY26, and Q4 tipped into positive territory at plus 0.1%. That is progress. But it is fragile progress, and the cautionary note from the summary slide is worth keeping in mind: B&M UK has had a slower start to seasonal trading in Q1 FY27. One warm April last year flattered the comparatives, and this year the garden season got off to a slow start.
The plan is right. The execution is improving. But the job is nowhere near done.
France = the business B&M wishes the UK was
While the UK was the source of almost every problem in FY26, France was quietly getting on with it.
Revenue grew 13.4%. LFL sales came in at plus 2.9%, ahead of the plus 2.6% posted in FY25. EBITDA grew from £48m to £53m. The 150th French store opened in May 2026, and management reports a good start to FY27, with footfall rising and market share growing in a competitive market.
The long-term opportunity in France is genuinely significant. B&M has around 150 stores serving a country with a similar population to the UK, where B&M has nearly 800. The runway for growth is long, and the model is clearly working. Quietly, France is becoming the most interesting part of this business.
The one caveat is margin. The EBITDA margin in France ticked down slightly as the business invested in distribution centre capacity to support further expansion. That is the right trade-off to make, and management expects margins to improve over time as the infrastructure investment is absorbed.
The long-term numbers are worth sitting with for a moment. B&M has 799 stores serving the UK, and management has guided towards an estate of 1,200 stores over time. France has a broadly similar population and currently has 150 stores. If B&M can replicate even a fraction of its UK density across the channel, the French business could eventually rival the UK in scale. That is not a promise, but it is a genuine opportunity, and right now it is the most exciting part of this company.
Heron Foods — the awkward third child
Heron is harder to write about positively.
LFL sales fell 1.7%. EBITDA dropped from £30m to £16m. The brand, which operates as a value convenience retailer primarily in the north of England, is struggling to find its footing in a market that has become considerably more competitive.
The structural problem is that Heron’s historical edge came from clearance stock, buying end-of-line and surplus goods cheaply and passing the savings on. That supply of clearance stock has dried up as suppliers have become more sophisticated about managing their own inventory. Heron’s model needs rethinking, and management acknowledged as much in the presentation.
The encouraging note is that early Q1 FY27 trading has shown positive LFL sales. Whether that is a genuine turning point or a low base effect remains to be seen.
Where does B&M go from here?
The Back to B&M Basics plan gets most of the attention, and rightly so. But quietly running alongside it is a more ambitious question: what does the B&M store of the future actually look like?
The answer, it turns out, is that it depends where you are. B&M has completed a clustering model that divides its UK estate into six distinct store types. A rural hub store, serving larger baskets with a garden focus, looks and feels different to a campus living store serving students in a high density city. An out of town store with the highest footfall and a DIY emphasis has different priorities to a central essentials store on a high street where customers are doing a quick grocery run. For years B&M ran broadly the same store everywhere. That era appears to be ending.
The company is currently trialling three levels of intervention across its estate. Re-laying, which matches the range to the local cluster profile and costs nothing in additional capital. Refitting, wh
ich optimises the range and improves the customer experience with varying levels of investment. And B&M 2.0, a more extensive layout and routing upgrade, with the first trial going live in Q2 FY27. The investment is designed to be self-funded through cost and working capital efficiencies, which if true is exactly the kind of capital discipline that makes a retailer worth owning.
The new store target for FY27 is 25 to 35 openings in the UK, a more measured pace than previous years, reflecting the deliberate choice to invest in the existing estate rather than simply adding more of the same.
The money question
For income investors, the dividend cut from 15p to 9.6p will have stung. But the balance sheet picture that sits behind it is actually encouraging. Leverage is at 1.4x, within the 1.0 to 1.5x target range, and free cash flow improved to £321m despite a very difficult trading year.
More significantly, the redomicile from Luxembourg to Jersey completed in February 2026. That might sound like a corporate housekeeping exercise, and in many ways it was, but the practical consequence is that share buybacks are now unlocked. B&M’s capital allocation framework is clear: invest in organic growth first, pay an ordinary dividend second, consider strategic acquisitions third, and return surplus capital to shareholders fourth. With the balance sheet repaired and leverage under control, that fourth option is now back on the table. For a stock that has fallen more than 50% from its highs, buybacks at these levels would be a meaningful signal of management confidence.
Whether they pull that trigger is a question for FY27. But the optionality is there, and that matters.
So is it a buy?
That is the question every investor reading this actually wants answered. At 211p, after a 24% move in five days, is there still money to be made here, or has the easy trade already happened?
The honest answer is that it depends on what you believe about the recovery. The operational picture is improving, the balance sheet is in better shape than it has been for two years, and France is compounding quietly in the background. But UK margins are still well below where they need to be, FY27 costs are rising again, and the Q1 seasonal trading has started slowly.
There is a genuine bull case here. There is also a credible bear case. And the valuation at current prices is interesting enough to warrant a proper look.
Part 2 is out soon for paid subscribers. We will work through what B&M is actually worth at today’s price, where the margin recovery could take earnings over the next two to three years, and whether the stock offers enough upside to justify the execution risk that still sits in this business.
If you are not already a paid subscriber, now is a good time.
Thanks for reading,
Ollz