The B&M European Value Retail (LSE: BME) share price is down more than 5% today (5 June) on the release of the full-year results report.

There are many positives in the FTSE 100 retail company’s narrative and figures. But adjusted earnings and operating cash flow came in essentially flat in the 53 weeks to 30 March 2024.

Maybe that’s why the market is negative on the shares. B&M hasn’t delivered a positive surprise with earnings.

This often happens. Results arrive and stocks fall on the day. But behind the shares, B&M has a profitable and growing business.

Robust shareholder income

The dividend is impressive. With the share price near 510p, the forward-looking yield is just above 4.8% for the trading year to March 2025.

Over the past few years, the compound annual growth rate of the dividend has been just over 15%. That reflects the success of the pacey store roll-out programme in the UK and France.

But that’s not all, the company has been paying special dividends on top of its normal payments.

Chief executive Alex Russo pointed out the firm has delivered cash returns over four years worth £1.8bn.

The firm’s dividend policy targets a payout ratio of 30% to 40% of net income. So, there’s a clear link between the performance of the business and the way the company rewards shareholders.

Russo said the business is at an “inflection point” for its store opening programme. Behind the earnings and cash flow figures, there was good progress in the year. Revenue rose by just over 10%, and the decent financial performance allows ongoing reinvestment for growth.

There was “significant” acceleration in store openings in the final quarter, Russo said, partly because the company had acquired select stores from the failed Wilko chain.

A positive outlook

Looking ahead, the directors expect “not less than” 90 new UK B&M store openings in the next two trading years. But there’s also room for big expansion in France where the company has a smaller percentage of the market.

However, like-for-like revenue growth from existing stores is an important part of the strategy. The UK business delivered an increase of 3.7% during the year via that route.

Like-for-like growth is “highly profitable” the company asserts on its website. The existing stores offer “considerable scope” for improving sales densities. In one interesting measure, each 1% of like-for-like sales growth is equivalent to opening seven new stores – wow!

The beauty of juicing up sales in existing stores is there’s no capital expenditure needed and it doesn’t increase fixed costs.

Right, enough of the positives, what are the risks here? Well, the discount retail sector is fiercely competitive and we can see in the Wilko disaster what happens when companies don’t keep their socks pulled up.

B&M looks like it’s been managed well by people who know what they are doing. But that could change. So that’s a risk for shareholders here.

Nevertheless, the company has potential for further profitable expansion. So, I see the stock as well worth further research now with a view to adding it to a diversified portfolio.