B&M shares tumble as CFO quits after huge accounting blunder
Shares in B&M have tumbled as the firm’s finance officer has quit following an accounting blunder that led to the company overstating its profits.
The FTSE 250 retailer said it had failed to recognise as much as £7m in overseas freight costs, which disappeared from its forecasts “following an operating system update.”
As a result, B&M has cut its pre-tax earnings for the year to £470m-520m, down from its previous forecast of £510m-£560m.
B&M shares tumbled as much as 18 per cent to 178p in the opening minutes of trade in London on Monday, hitting an all-time low. The stock has roughly halved in value since the start of the year.
The discount retailer said its chief financial officer Mike Schmidt had decided to quit the company amid the accounting error. B&M said Schmidt would continue serving on the board until a replacement had been identified.
“The board wishes Mike well for the future,” B&M said in a statement.
B&M looks to ‘correct the operational weaknesses’
The blunder marks the latest setback for B&M after it warned earlier this month that it would have to “correct the operational weaknesses” amid falling profits.
Chief executive Tjeerd Jegen said: “While B&M’s value proposition remains strong, our operational execution has been weak. This has impacted our first-half trading performance, and this is reflected in the full-year outlook that we publish today.
“Our response is a decisive plan, ‘Back to B&M Basics’, focused on returning the UK business to sustainable like-for-like growth. This is our absolute priority.“
“We are taking decisive actions to correct the operational weaknesses identified.”
The company’s turnaround plan includes cutting prices across a range of products, rolling out more promotions, and reducing the number of lines of products to save costs.
B&M closed 14 stores in the UK during the period and opened 23 new ones, leading to 9 net new stores.
The firm warned its “back to basics” turnaround plan was expected to take at least 12-18 months “to take effect”.
B&M previously said it expects to report pre-tax earnings of £198m in the six months to end September, a drop of 28 per cent on last year, while UK revenue was up 3.5 per cent to £2.2bn over the period.
“A second downgrade in 13 days undermines B&M’s credibility as it tries to progress with a turnaround and stabilize margin,” said Bloomberg Intelligence analyst Evgeniy Batchvarov.