Wilko’s collapse has left rival B&M as perhaps the leader in high street bargain retail, with analysts touting the group will maintain its rapid growth trajectory.
On Monday it was revealed that last-minute talks to rescue Wilko had collapsed as auditors failed to reach a deal with HMV’s owner to save jobs at 200 stores.
But B&M has already moved to acquire 51 of Wilko’s 400 stores in a £13m deal, as it capitalizes on its rival’s collapse.
This is Money looks at how B&M became a UK retail powerhouse, why it would want to buy a large chunk of collapsed Wilko stores and the group’s growth plans.
B&M stepped in this week to take over several Wilko stores as it capitalized on rivals’ collapses.
What does B&M do?
B&M sells everything from food and pet supplies to kitchenware and electrical appliances.
It was founded in 1978 by Malcolm Billington and Brian Mayman and the company was originally known by the names of its founders: Billington and Mayman.
In 2004, it was sold to the Arora brothers, Simon, Bobby and Robin. It then became B&M.
The brothers, whose father ran a cash and carry in Manchester, have since built B&M into a fast-growing chain.
A key part of B&M’s success lies in the retailer’s ability to source its huge range of products directly from its own Asia-based purchasing operation, giving it an advantage in design and value.
Former Tesco chief executive Sir Terry Leahy joined the company in 2012 before leaving in 2017, and in that time the company saw sales and profits soar thanks in part to new store openings and the acquisition of frozen food retailer Heron Foods.
The bargain retailer employs 30,000 people across its 937 stores and also owns Jawoll in Germany.
Having been listed on the London Stock Exchange for just under a decade, b&m actions They have become a staple of many investors’ portfolios.
Richard Hunter, head of markets at Interactive Investor, said: ‘The shares listed on the market in June 2014 at a price of 270p.
‘The stock soon caught the imagination of investors, so B&M rose to the FTSE 100 in September 2020, where it remains today.
‘The shares soared after this promotion and reached a high of around 640p in December 2021.
‘Although the shares subsequently retreated from those heady highs, currently standing at 556p, the price has risen 51 per cent over the last year.
“The recent rise in their fortunes is largely due to their value offering to consumers, which has become a focus of attention given the general pressure on customers’ pockets and the cost of living crisis they are experiencing some”.
Why did Wilko collapse?
In August, Wilko announced it was going into administration, putting 12,000 jobs and 400 stores at risk.
Mark Jackson, chief executive of Wilko, said in an open letter last month: “We leave no stone unturned when it comes to preserving this incredible business, but we must admit that, unfortunately, we have no choice but to make the difficult decision to enter administration.’
Signs of Wilko’s problems emerged in 2017, when the company launched a redundancy consultation affecting 4,000 jobs.
Wilko posted a £65m loss that year and continued to disappoint thereafter.
The company took a number of steps to improve its financial position, including a strategic partnership with DHL, further job cuts and a £40m funding facility secured from Hilco UK earlier this year, which was later extended.
The Mail on Sunday exclusively revealed last month that Wilko paid a total of £77m to the owners and former shareholders of the stricken retail chain in the decade before its collapse.
This included a £3m dividend last year, which was paid despite Wilko racking up losses of £39m. A total of £3.2 million was shared in 2018 when Wilko suffered a loss of £65 million.
In August, Wilko announced it was going into administration, putting 12,000 jobs and 400 stores at risk.
Retail experts have blamed Wilko’s eventual collapse on the cost of living crisis and economic uncertainty, as well as its inability to recover from the impact of the pandemic.
But B&M’s sales grew by 24 per cent between April and December 2020, while other “non-food” companies also performed well.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, described B&M’s acquisition of some Wilko stores as “a symbol of its meteoric rise as it benefits from its rival’s mistakes”.
He added: ‘B&M’s position in retail parks rather than predominantly high streets helped it during the pandemic, when customers preferred out-of-town locations.
‘It is likely that during this time B&M gained new customers who left Wilko permanently.
“B&M has also managed its proposition and pricing techniques well over the last few years, which has helped it gain and retain fans.”
What are B&M’s expansion plans?
In a trading update in May, B&M chief executive Alejandro Russo outlined his vision for the company, which will see the retailer significantly increase its store footprint.
He said: “We have previously made clear that the 950 store target is conservative but still represents around 35 per cent more stores than today, and the newer stores are on average larger than existing stores and have a total higher”. sales, sales growth should be even higher than this 35 percent.
‘We will accelerate the opening of our new stores to 40 stores per year, with around 30 expected in FY24, but we will always focus on new stores that generate leading return on investment.
‘We will not compromise our investment targets and we will not open unprofitable stores just to meet a store opening target. “Profitable and sustainable growth is at the core of our business.”
The company also plans to open 20 Heron stores in the UK, plus 10 more stores in France.
Interactive Investor’s Hunter said: ‘Its most recent acquisition of 51 Wilko stores is also a show of intent.
‘As so often in the past in the retail sector, survival of the fittest prevails.
‘Companies that stay not only have less competition as others go out of business, but they may also have the opportunity to take over all or part of rival operations at bargain prices, as was the case with Wilko .
“The market consensus on the stock’s strong hold suggests that some investors believe the price is on the upside for now.”
HL’s Lund-Yates warned that “there are still broader challenges B&M must address”, particularly as consumers continue to feel the squeeze.
She said: ‘The cost of living crisis is pushing people towards discount options, but overall spending should fall due to very high interest rates and tight incomes.
“The lack of strength online is also a weak point and could cause it to lose market share in the long term.”
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