- B&M European Value Retail S.A. (DI)
- 17 June 2024 09:03:45
Source: Sharecast
"Freight rates have been rising again in recent weeks, due to global capacity being more fully employed, Red Sea diversions and stronger demand for containers," the broker said in a research note on Monday.
"Rates have now moved up in excess of their February peak. [...] Although the current situation is not as acute as during the 2021 Suez Canal blockage and the global pandemic, we are likely to see a headwind for gross margins from late 2024 and in 2025."
Nevertheless, RBC said that bigger volume players such as Primark owner Associated British Foods have a "scale advantage".
RBC said that hardlines retailers have move exposure, with freight accounting for at least 6-7% of the cost of goods sold and the companies having a higher margin sensitivity than those in the apparel sector.
"Around 30% of B&M's sales come Asia but the vast majority of this is low ticket items, with FMCG (50%) sourced locally. Also, we think B&M has been able to use its strong volume growth to negotiate good terms on freight, so we don't expect much of an effect on its P&L," the broker said.
B&Ms shares were up 1.2% at 468.7p by 0901 BST.