Specialist
Former director at Poundland Ltd
Agenda
- Coronavirus impact on demand dynamics, product shift, customer volume and average transaction size
- B&M's (LON: BME) UK growth strategy and product offering
- Competitive landscape among UK discount retailers
- Post-coronavirus challenges and potential medium-term structural market changes
Questions
1.
Could you highlight the key trends shaping the UK variety store and discount retail industry pre coronavirus?
2.
How has the pandemic changed those trends? How much more drastic was the decline in footfall in town centres and high streets? You mentioned it was already down 4-5% YoY pre-coronavirus.
3.
Could you elaborate on B&M’s weight of purchase increase and why it is higher than its competitors?
4.
How has the shift in category mix changed the profitability of B&M stores? Are categories such as DIY and home improvements more profitable than the declining confectionery category?
5.
Has the industry and B&M especially experienced different developments through the second UK lockdown than the first?
6.
Do you think the difference in season will change customer perceptions of shopping for DIY and homeware products? Do you expect any drop-off in the category mix?
7.
You mentioned B&M doesn’t have a strong online presence. Do you think online is a missed opportunity for B&M, or do you think it opted for the right strategy with its destination stores as we discussed?
8.
You indicated that B&M’s ultimate shift to online will help it leverage its garden and home furnishings products. Is that because the profit margins there are significantly better than grocery, which isn’t always as margin-accretive to sell via an online channel?
9.
We outlined B&M’s strong growth story through the lockdown. Who are its key competitors across major verticals, and do you think it has taken share during this period in anv verticals?
10.
What are the risks associated with B&M’s breadth of offering out of lockdown? It served the company well through the lockdown, but how sustainable is this growth beyond these circumstances?
11.
Are there any weaknesses or gaps across B&M’s broad product portfolio that it might fill or develop?
12.
Does B&M compete against Iceland and others in the frozen food category?
13.
Does B&M’s Heron Foods frozen offering create another destination and weighs positively for the overall average ticket size?
14.
How would you assess B&M’s real estate footprint and store layout? Do you think 600 stores is optimal or do you expect further store roll-out?
15.
Are there any more opportunistic or under-indexed regions you expect B&M to target for new stores?
16.
Could you indicate the CAPEX requirements of opening a new store for B&M?
17.
Are there any more significant CAPEX requirements with rolling out the frozen category within some stores? I understand that freezers are fairly capital-intensive.
18.
You mentioned B&M being the anchor tenant would incentivise landlords to drive down occupancy costs. Could you indicate how much benefit B&M can drive here?
19.
Do you think there is any risk that retailers might be obliged to pay back some of the business rates or lose out on any further rate relief, given that they have performed well through this environment?
20.
What is your take on B&M’s management team, and especially the CEO Simon Arora and his management style? How would you assess the approach to capital investment and generating return on capital?
21.
How would you evaluate the quality of B&M’s core range vs its competitors, and how do you think customers perceive it? Do they consider it a high-quality product range?
22.
You said your own business and other competitors benchmark themselves to B&M – would that suggest there isn’t a significant price gap between B&M and its competitors?
23.
What is your 12-month outlook for pricing? Do you expect any price inflation to come through?
24.
How easy is it to pass through that cost price inflation to the consumer?
25.
Would you expect B&M to be more insulated from cost price inflation?
26.
You mentioned B&M sources heavily from overseas – do you have an indication of what percentage this is?
27.
How does B&M approach private labels and how has its private label offering been growing?
28.
How would you characterise B&M’s promotional activity? Presumably it was low this year due to the pandemic, but what percentage of products are typically sold on promotion and how might this have changed?
29.
Do you think B&M and other retailers will enjoy more substantial pricing power coming up to the Christmas period, given the demand environment?
30.
How would you analyse B&M’s medium-term prospects? Do you think there is any further room for cost reduction?
31.
What do you think a recession could mean for B&M? Do you expect further gains over the next six months? Would you expect it to outperform in the scenario of the furlough scheme stopping, a recessionary crunch and a strain on consumer wallets?
32.
To what extent is B&M at risk from the rise of Amazon in the UK and other pure online players such as Wayfair?
33.
Are there any other major risks to B&M or the industry you want to highlight?
