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Lower-income consumers missing out on wage rises have been blamed by one of Britain’s biggest discount retailers for a slide in its sales and profits.
B&M, which issued a profit warning in February, said consumers had been more cautious about their spending over the past year.
It added its sales had fallen because of “limited real wage growth”, particularly among its “core lower-income consumer groups” who had previously received emergency cost of living support payments from the government, which ended in February 2024.
The retailer, which sells everything from cleaning products and pet food to garden furniture and inflatable hot tubs, said comparable sales at its more than 740 UK stores fell by 3.1% in the 12 months to the end of March.
The group’s pre-tax profit fell by 13.2% to £431m as a result of higher depreciation and increased interest costs as well as the “challenging UK retail trading environment”.
Shares in the company dropped by as much as 7% during morning trading on Wednesday after the results, as the company admitted its “operational execution could have been better”.
The UK’s largest bakery chain, Greggs, said in May its sales of iced drinks and snacks were on the rise, even as consumers remained cautious, while it was benefiting from the rise in consumers’ disposable income, helped by the April increase in the legal minimum wage.
Average wages across the economy increased by 6.4% in the year to April, according to the most recent official payroll data from the Office for National Statistics, at a time when inflation was 3.5%.
Meanwhile, hotels and restaurant staff managed to secure an 8.5% increase in median pay over the year to April, according to the ONS, while retail workers were paid 6.9% more over the same period.
Recent public sector pay awards were also higher than ministers had previously said they could afford.
B&M – currently being led by its finance director, after the departure of its chief executive, Alex Russo, this year and before the arrival of its new boss in mid-June – should have been winning over new customers amid a squeeze on consumers’ finances, according to Russ Mould, the investment director at broker AJ Bell.
“The discount retailer blamed challenging market conditions, yet its value-led business model should have thrived in a period where consumers were watching their pennies,” Mould said.
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“It should have mopped up extra business from people trading down from more expensive options, while also being a shop of choice for cash-strapped individuals wanting bargains.”
Among the bargain-lovers known to shop at B&M are the former prime minister Boris Johnson and his wife, Carrie, who recently revealed on social media they had taken their new baby to their “favourite shop”.
Meanwhile, the retailer WH Smith, which is due to disappear from British high streets in the coming weeks, reported a 7% increase in sales at its travel shops in railway stations, airports and hospitals in the 13 weeks to the end of May.
The company, which agreed to sell its 480 high street stores in March to the Hobbycraft owner, Modella Capital, in a deal worth £76m, said it expected to complete the sale at the end of June.
WH Smith said its remaining travel business was on track to meet its full-year financial targets, and said it was “well positioned as we enter our peak summer trading period”.
