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UK variety discounters: differing financial results, diverse strategies

The latest results from variety discounters B&M, Home Bargains and Poundland show a mix in performance. We have seen a continuation of the patterns of previous years, with B&M and Home Bargains growing rapidly and Poundland growing slowly. The …

The latest results from variety discounters B&M, Home Bargains and Poundland show a mix in performance. We have seen a continuation of the patterns of previous years, with B&M and Home Bargains growing rapidly and Poundland growing slowly. The results are mainly driven by the retailers differing strategies, with B&M and Home Bargains focused on opening new stores, and Poundland focusing on revamping its existing estate.

B&M: unscheduled trading update shows strong growth for the start of 2021 Results are for the first nine weeks of Q4 (Jan/Feb 2021)

  • Grocery sales growth at a similar levels to Q3-B&M UK +26.6% (+21.1% like-for-like growth)
  • Expect EBITDA to be GBP590-620m compared to previous expectations of GBP540-570m

Home Bargains: +13% turnover Results in the 12 month period to 30th June 2020

  • Turnover: GBP2.29bn
  • Turnover growth: 13%
  • Operating profit: GBP260.1m
  • Operating profit growth: 12.5%
  • Margin: 9.3%

Poundland Group (Poundland and Dealz): +4.3% total revenue growth

Results are for the 52 week period ending 30th September 2020

  • Revenue: EUR845m (GBP730m)
  • Total revenue growth: 4.3%
  • Like-for-like revenue growth: 2.2%
  • Number of stores: 915
  • Store growth: 4.6%

COVID has a mixed impact

The retailers have had different experiences during the pandemic. Poundland experienced challenges throughout 2020, declining footfall in certain locations caused it to put some stores into hibernation. The retailer initially temporarily closed 130 stores in April 2020, which were subsequently re-opened in May.

In January 2021 it temporarily closed 44 stores, and these began to be re-opened towards the end of February 2021. B&M closed fewer stores, with only 49 impacted. Home Bargains were able to keep all stores open throughout 2020.

B&M and Home Bargains were also better set up to serve shoppers on different missions throughout the pandemic due to their larger grocery ranges.

The variety discount channel continues to evolve

Continued evolution towards a stronger grocery proposition makes the variety discount channel an interesting area to watch. B&M is still in the process of rolling out more of its chilled and frozen range in the UK. In France the retailer is converting 60 Babou stores to the B&M format in 2021.

This is likely to mean increasing the grocery range, as it moves away from Babou's non-food focus. It is also trialling click and collect in some of its stores in France. The pandemic has forced more shoppers online and both B&M and fellow variety discount Action are looking to find ways to satisfy the growing demand.

Although B&M has not announced any plans to try this service in the UK, it is likely that the retailer will be looking to the French market for learnings for the future. Poundland has seen the biggest changes since the beginning of 2020, with an expanding range, ecommerce trial, store transformation and the acquisition of Fulton Foods. Following a successful trial in three stores of alcohol shop-in-shops, Poundland will now be rolling this concept out further in 2021.

The new range includes beers, wines and spirits with prices ranging between GBP2 and GBP10. We expect to see continued evolution in the year ahead as the retailers look to differentiate themselves from each other in this very competitive value sector. Giving shoppers more reasons to visit will be vital in the coming months and years as we go through what is expected to be a challenging trading environment.

Looking for more insight?

Subscribers looking for more information on the variety discounters should check out our: UK variety discount: What you need to know presentation.

We combine our retail and shopper knowledge to give you a deeper understanding of the key trends shaping the variety discount channel.

Subscribers to ShopperVista can see more in our destination categories in variety discounters and variety discount retailers compared.

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