Poundland buoyed by middle class bargain hunters

Poundland is rising fast and is now seeing a growing middle class customer base. Picture: PA
Poundland is rising fast and is now seeing a growing middle class customer base. Picture: PA
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DISCOUNT retailer Poundland yesterday revealed its growing domination of the recession-struck high street with record sales and profits and confirmed it was on track to reach 1,000 stores.

The chain, controlled by private equity firm Warburg Pincus after a £600m buyout in 2010, is thought to be pressing ahead with plans to float the business in the first half of of next year.

Europe’s largest value retailer also said its new financial year had started well with trading ahead of its expectations.

Despite benefiting from the squeeze on living standards, the firm hailed its ability to “capitalise on any upturn in the economy and consumer confidence”, pointing to the 20 per cent of its customers that are middle class.

Value retailers have outperformed the market in the economic downturn as consumers have sought to make savings.

The company trades from 458 stores in Britain and Ireland, an increase of 69 during the year, including 17 in Ireland where it trades as Dealz. It plans to add 50 in 2013-14, having already opened 30.

Yesterday it posted a 15.6 per cent rise in underlying earnings to £45.4 million in the year to end of March. Turnover increased 15 per cent £880m.

Independent retail analyst Nick Bubb said a flotation should be well received but warned that the firm had to ensure it looked after increasingly stiff competition from rivals such as 99p Stores.

He said: “Poundland has a lot of faster-growing discount competitors and it will need to convince investors that it is not showing some signs of maturity.”

During the year, the company created 1,700 jobs and is developing a 350,000sq ft distribution centre in Harlow, Essex due to open next year, creating a further 650 permanent jobs. Jim McCarthy, the firm’s chief executive, said: “This has been a year of tremendous progress for Poundland. Sales and EBITDA [earnings before interest, tax, depreciation and amortisation] hit new record levels and over four and a half million customers came into our stores each week. The discount sector is now a mainstream feature of the UK retail scene.”

In yesterday’s statement, McCarthy confirmed that there are “some early positive signs of economic recovery in the UK”.

“Poundland is exceptionally well placed to capitalise on any upturn in the economy and consumer confidence: over 20 per cent of our customers are now from the AB demographic and our trading history shows that as economic conditions improve Poundland benefits from higher footfall and a better sales mix driven by greater spend on higher margin discretionary products.

“Over time I’m confident that we will have over 1,000 Poundland stores in the UK,” he added.

The company said it sourced more than 70 per cent of its products – which include brands such as Cadbury, Heinz, Coca Cola and Kodak – through UK companies but added that its operations based in Hong Kong and New Delhi have “grown further over the period and are an increasingly important part of our sourcing operations”.