B&M has warned of rising cost pressures in the year ahead as the discount retailer posted a sharp fall in annual profits.

The value retailer, which sells products across grocery, home, furniture and garden, reported a 26 per cent drop in annual profit after flat UK like-for-like sales and deeper price cuts weighed on performance.

B&M said the conflict in the Middle East was adding upward pressure to costs, creating a tougher backdrop for the business as it works through a turnaround plan following two profit warnings over the past year.

The group reported adjusted core profit of £459 million for the year ended 28 March.

It also pointed to a slow start to its key garden season, although better weather in late May helped drive a recovery in sales of seasonal categories.

The update comes as B&M looks to rebuild momentum after a challenging year, with shoppers continuing to seek value while remaining cautious on discretionary spend.

The retailer’s latest performance highlights the pressure facing even discount operators, as higher costs, fragile demand and increased promotional activity continue to weigh on margins.

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