Careful shoppers make Poundland a £500 million hit

Published on Wednesday 18 August 2010 14:40

FROM garden gnomes and soup through to toothpaste and drumsticks, it could never be described as the most discerning of retail experiences. But price, it seems, conquers all.

<p style="clear:both;"

• The shelves are crammed with tempting deals at Poundland and the recipe seems to be paying off Picture: Donald MacLeod

Poundland, the discount chain set up two decades ago by a group of former market traders, has turned the heads of the high street after posting remarkable annual results.

The group, which has 36 stores in Scotland, saw its profits nearly double over the past 12 months, with turnover now exceeding 500 million.

With wary consumers looking for the best deals on everyday products, Jim McCarthy, Poundland's chief executive, said his firm is welcoming increasing numbers of new customers at a time of economic uncertainty.

Given plans for a further expansion of the Poundland empire that will add to its 260 British stores, it is a name which will only become more prominent.

Whereas the chain's profits last year were a respectable 11.8m, the figure now stands at 21.5m, a growth of 81.5 per cent.

Turnover is also up from 396.2m in 2008-9 to 509.8m for the year ending 28 March, with like-for-like sales up by 0.7 per cent.

The past 12 months has seen the opening of 56 new stores. It is an expansion programme which shows no sign of slowing, with plans for 50 new outlets in the next year - including one in Leith, due to open this month - creating 2,000 jobs. More than three million customers pass through its stores every week.

Mr McCarthy said: "Our latest results show that consumers from all income brackets are savvy enough to shop with us.

"With the economic uncertainty continuing, we are seeing many more first-time shoppers joining our existing loyal customer base and with this trend set to continue, I remain confident of our prospects for the current financial year."

Mr McCarthy, a former chief executive of Sainsbury's convenience stores, added that in order to entice new customers into his stores, Poundland has increased the number of branded products on its shelves, with more than 1,000 product lines boasting recognisable names, in addition to thousands of other items.

Based on the popular US concept of dollar stores, which first emerged in the 1950s, Poundland was founded by father and son Keith and Steve Smith, and Dave Dodd, from Wolverhampton. Pooling their resources, they set up a single shop in Burton upon Trent, Staffordshire, in 1990.

Twelve years later, a retail network of 70 stores was sold to Advent International, a private equity group, for 50m. In May, the group's 260 stores were sold to Advent's rival buyout company, Warburg Pincus.

Mr Dodd, who retained a 12 per cent stake at the time of the initial 2002 sale, made an overnight profit of 24m.

Last year, Poundland acquired several former Woolworths stores, re-employing their staff. The so-called "value market", which includes retailers such as Pound World and 99p Stores , is estimated to be worth 24bn, with forecasts suggesting the sector will grow by a fifth over the next four years.