
In a dramatic turn of events for one of Britain's favourite discount retailers, B&M European Value Retail has announced the immediate departure of its finance director following a major accounting error that sent shockwaves through the market.
The company revealed that a significant oversight in its financial reporting would impact its current-year profits, forcing the retail giant to issue a profit warning that immediately wiped approximately £500 million from its market value.
The Accounting Mishap
The error, described as relating to 'timing and classification' of certain costs, means the company's underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) will be approximately £40 million lower than initially anticipated for the current financial year.
While B&M emphasised that the mistake doesn't affect cash flow and is purely an accounting issue, the market reaction was swift and severe, with shares plummeting as much as 22% in early trading.
Leadership Shakeup
The accounting revelation prompted the immediate resignation of finance director Michael Lenhart, who had only joined the company in October 2022. B&M stated that Mr Lenhart would step down from the board immediately and leave the company following a handover period.
Current chief executive Alex Russo moved quickly to reassure investors, stating: "Whilst there was a material error in the FY24 year-end numbers, this was historical in nature and has no impact on the group's cash flow, debt or future trading prospects."
Market Impact and Recovery
The profit warning comes at a challenging time for the retail sector, with consumers continuing to feel the pinch from cost-of-living pressures. Despite the accounting setback, B&M reported that trading remained in line with expectations, with like-for-like sales in its UK business growing 2.5% in the first quarter.
Analysts have suggested that while the accounting error is embarrassing for the company, the fundamental trading performance remains robust, potentially creating a buying opportunity for investors willing to overlook the short-term turmoil.