B&M Shares Plummet as CFO Resigns Following £7 Million Error

Discount retailer B&M has faced a significant setback, announcing a revised profit forecast due to a £7 million accounting error. In a surprising update on September 25, 2023, the London-listed company confirmed that its Chief Financial Officer, Mike Schmidt, will resign following the revelation of this financial miscalculation.

The accounting issue stemmed from overseas freight costs that were “not correctly recognised in cost of goods sold.” This discrepancy is linked to an operating system update implemented earlier this year. Although B&M stated that the underlying issue has been resolved, it acknowledged that the error will adversely affect the company’s financial performance for the current fiscal year.

In light of this error, B&M adjusted its earnings forecast for the first half of the year, estimating adjusted earnings of approximately £191 million, down from a previous estimate of £198 million. For the financial year, group adjusted earnings are now expected to fall between £470 million and £520 million, a reduction from the earlier guidance of £510 million to £560 million.

To address the situation, B&M announced plans to initiate a comprehensive “third-party review” of the incident. Despite these setbacks, the company still anticipates that like-for-like sales growth will remain within a range of “low-single-digit negative and low-single-digit positive levels” for the second half of the year.

This update follows a troubling period for B&M, which recently reported a 1.1% decline in UK like-for-like sales for the second quarter, exacerbated by rising operational costs. The company has also noted a £30 million increase in wage expenses and a £14 million impact from packaging taxes over the latest half-year. In response, B&M has initiated a series of turnaround strategies, including price reductions on key items to bolster performance.

Mr. Schmidt’s resignation has drawn attention in the financial community. Dan Coatsworth, head of markets at AJ Bell, commented on the situation, stating, “Just when it looked as if life couldn’t get any worse for B&M, along comes an accounting error which has ultimately cost the finance boss his job.” He emphasized the embarrassment for the board and the negative implications for shareholders.

Following the announcement, B&M shares experienced a dramatic decline, dropping 17.9% to 178.1p, reaching record low levels. The company is now faced with the dual challenge of restoring investor confidence while navigating the financial repercussions of this incident.