UK value retailer cuts guidance and faces CFO exit amid questions over internal controls and freight-cost oversight

London, Monday 20 October 2025 – British discount retailer B&M European Value Retail plc has rattled investors and the retail sector by slashing its profit outlook and revealing an accounting error linked to overseas freight costs. The announcement, which also included news that Chief Financial Officer Mike Schmidt plans to step down, sent the company’s shares tumbling and reignited concerns over corporate governance in the UK’s embattled value-retail segment.

In a regulatory update issued on Monday morning, the FTSE 100 retailer said an internal review uncovered that roughly £7 million in overseas freight costs were not properly recorded in its cost of goods sold after a system update earlier this year. The discrepancy was discovered during the consolidation of half-year accounts, forcing B&M to cut its full-year profit guidance for the 2025-26 fiscal year.

The company now expects adjusted EBITDA (pre-IFRS 16) of between £470 million and £520 million, down from a previous forecast range of £510–560 million. First-half earnings are expected at around £191 million, a reduction from prior expectations of £198 million.

“This error should not have occurred, and we are taking immediate steps to strengthen oversight of cost-recognition processes,” a company spokesperson said. “The underlying system issue has been resolved, and we are confident in the robustness of our controls going forward.”

Governance shake-up and CFO departure
Alongside the profit warning, B&M confirmed that CFO Mike Schmidt, who joined the company in 2022 after a stint at DFS Furniture, will step down once a successor is found. Analysts interpreted his exit as a signal of board frustration over the lapse, which has undermined market confidence just months into a new leadership phase.

“Losing the CFO at a time like this adds to the perception of instability,” said Clare Barnes, a retail analyst at Jefferies. “While the error itself is modest in absolute terms, it represents a larger credibility issue for B&M’s finance and risk-management functions.”

The company, headquartered in Liverpool and listed in Luxembourg, operates more than 1,200 stores across the UK and France under its B&M and Babou brands. Known for its low prices and “treasure-hunt” shopping model, the retailer has built a strong presence among budget-conscious households — a demographic that has expanded during the UK’s protracted cost-of-living squeeze.

Yet the accounting mistake comes at a sensitive time for B&M, which is already grappling with sluggish consumer demand, rising wage costs, and supply-chain pressures.

Market reaction: sharp sell-off
Shares in B&M plunged over 17 percent in early London trading on Monday, wiping roughly £900 million off its market capitalisation. Investors said the profit warning — the company’s second in less than six months — raised doubts about its ability to deliver on promises of tighter cost control and improved margins.

“The optics are poor,” said James Bainbridge, portfolio manager at Newton Investment Management. “Freight costs have been a key line item across the sector for years, so for a system issue to distort that figure suggests internal controls that aren’t fit for a company of this size.”

By midday, trading had stabilised somewhat, with shares recovering part of their losses as the company reiterated that cash flow and store expansion plans remain on track. Still, analysts warned of lingering reputational damage.

A deeper look: how freight costs tripped up B&M
According to sources familiar with the review, the error stemmed from a software migration in B&M’s overseas procurement system. Freight costs associated with imported general-merchandise goods — particularly from Asia — were inadvertently recorded under a deferred expense category rather than as direct costs of sales.

The misclassification inflated reported profits for part of the first half of the year. Once identified, the company moved swiftly to correct the accounting entries and adjust forecasts before publishing interim results in November.

“While £7 million may not seem catastrophic, it’s a symptom of the pressures discount retailers face to keep logistics costs tightly monitored,” said David Luce, partner at KPMG’s retail advisory division. “Automation and rapid system changes often increase the risk of these small but consequential errors.”

Sector context: turbulence across UK discount retail
B&M’s setback follows a difficult trading year for UK value retailers more broadly. Competitors Home Bargains, Poundland, and The Range have each reported softening like-for-like sales amid waning consumer spending and a pivot toward essential goods.

Although inflation has moderated since 2024, real wages remain under pressure, and price-sensitive shoppers are spending less on discretionary items such as homewares and garden products — historically strong categories for B&M.

Meanwhile, the group’s French business, Babou, continues to underperform, facing competition from discount chains such as Action and Noz. In its previous results, B&M described its European operations as “strategically valuable but structurally challenged,” with store rationalisation ongoing.

Leadership and the “Back to Basics” plan
Earlier this month, new Chief Executive Tjeerd Jegen, formerly head of HEMA and Carrefour Poland, unveiled a “Back to Basics” programme aimed at simplifying operations, enhancing product availability, and cutting prices to defend market share.

Insiders say Jegen had already been planning a comprehensive finance-function review before the freight cost error came to light. The incident has now accelerated those plans, with a new focus on centralising procurement data and standardising accounting protocols across international divisions.

“Transparency and cost discipline will define this next chapter,” Jegen told employees in an internal memo seen by the Financial Times. “Our value promise to customers must rest on equally rigorous internal standards.”

Analysts’ outlook and investor sentiment
Despite the stumble, several analysts said B&M retains a strong long-term proposition in the discount retail sector, pointing to its robust cash generation, limited exposure to online competition, and loyal customer base.

“B&M is still fundamentally profitable and expanding in a value-driven environment,” said Oliver Hughes at Deutsche Bank. “However, recurring operational missteps will keep the share under pressure until the new CFO can restore credibility.”

The company expects to publish detailed half-year results on 13 November 2025, at which time investors will look for further details about internal control enhancements and progress under Jegen’s turnaround plan.

Looking ahead: repairing trust
The accounting oversight may prove more symbolic than financially damaging, but it highlights the fragility of investor confidence at a time when consumers and markets alike are demanding stability.

For B&M, the challenge now is two-fold: regaining trust in the boardroom and reinforcing its reputation with millions of cost-conscious shoppers who see its stores as an everyday lifeline.

As one senior analyst put it, “Retailers can survive tighter margins — but not a credibility gap.”

Whether B&M can navigate both the market’s skepticism and its own internal reforms will define the next chapter in its discount-retail journey.