B&M Accounting Error

Here are the key details of the incident:

Nature of the Error:
- B&M identified that approximately £7 million of overseas freight costs were not correctly recognized in the Cost of Goods Sold (COGS) following an update to its operating system earlier in 2025.
Cause:
- The error was attributed to an underlying system issue that emerged after an operating system update.
Financial Impact:
- This blunder forced B&M to issue its second profit warning in a month, leading to a downgrade of its full-year profit guidance (Adjusted EBITDA for FY26).
- The guidance was lowered from a previous range of £510m – £560m to a new range of £470m – £520m.
Personnel Change:
- In connection with the accounting error and the profit downgrade, Mike Schmidt, the Chief Financial Officer (CFO), announced his intention to step down from his role.
Resolution:
- B&M stated that the underlying system issue has since been resolved and that the company intends to commission a comprehensive third-party review into how the error occurred.

Freight costs are part of COGS for a retailer importing goods. If they are omitted or mis-classified, gross margin and profitability are overstated.
A £7m cost error triggered a much larger revision (~£40m) in full-year outlook, raising questions about systems, controls and margin assumptions.
Investors reacted strongly (shares fell significantly) — pointing to a credibility and oversight concern.

B&M imports large volumes of merchandise, often from overseas. Accurate freight allocation is important for cost-controls.
The error happened in the consolidation process after H1 results had been announced (7 October 2025) and was discovered during the H1 end consolidation.
The retailer had already been facing margin pressure from rising wage, tax and packaging costs. The oversight added to the operational pressure.