Poundland turnover tops £1 billion

Discount retail chain Poundland has smashed through the £1 billion turnover mark – but there are signs that its meteoric growth may be cooling a little.

Poundland opened a net 60 stores in the UK and Ireland last year. Picture: Craig Coley
Poundland opened a net 60 stores in the UK and Ireland last year. Picture: Craig Coley

The firm, which has nearly 600 stores in the UK and Ireland, yesterday reported a rise in sales of 11.4 per cent to £1.1bn for the year to 29 March.

In a trading update ahead of full results in June, it said same-store sales lifted 2.4 per cent during the period, adding that it opened 60 stores in the UK and Ireland as planned – ten fewer than previously.

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The full-year sales growth was lower than last year’s 13.3 per cent rise due to strong trading in the previous 12 months and the lower rate of store openings.

The group, founded in 1990, is currently facing a competition inquiry from the Competition and Markets Authority (CMA) into its £55 million takeover of smaller rival 99p Stores, which could see it having to sell off a number of outlets.

The planned merger, announced in February, would create a network of 800 shops.

Last week the CMA warned that the deal could mean “substantial lessening of competition in 80 local areas where the companies overlap” and 12 where they would compete “in the near future”.

In yesterday’s update, Poundland said it continued to “carefully consider” the CMA’s announcement and said it will make a further announcement “in due course”.

It pointed to a strong pipeline of openings for the current financial year, adding that it was on track to meet underlying pre-tax profit forecasts of £43.8m.

Chief executive Jim McCarthy said: “After a solid quarter of sales growth, Poundland’s revenue for the 2015 financial year was over £1bn for the first time. Despite tough trading conditions, Poundland continues to perform well and we served an average of 5.3 million shoppers a week during the quarter.

“We have managed our costs and cash well, and we expect underlying pre-tax profits to be in line with market expectations for the year as a whole.

“We achieved our target of 60 net new stores in the UK and Ireland and have a very strong pipeline of store openings for the current financial year.”

The group said it was pleased with the progress of its Spanish trial format, which saw it reach a total of five stores in the final 13 weeks of its year.

Discount stores such as Poundland, and grocery discounters including Aldi and Lidl, have eaten away at the market shares of major grocers, sparking the ongoing supermarket price war.

Grocery prices are 2 per cent lower than they were last year, according to the latest 12-week data from research group Kantar Worldpanel.

Lewis Sturdy, a dealer at London Capital Group, said: “Poundland has proved that if you look after your pennies the pounds will look after themselves – £1bn worth of revenue for the first time.

“Investors may shrug off the competition probe into Poundland’s takeover of rival 99p Stores as operations are cashing up fine.”

Meanwhile, analysts at house broker Shore Capital described the CMA intervention in the 99p Stores deal as “a little bit of a set-back”.

They noted: “If the 99p deal cannot be sensibly seen through due to CMA restrictions then Poundland will do what is right for shareholders and walk away, albeit careful consideration implies that a way is still being sought to find a breakthrough, in our view.

“Beyond 99p, we believe that the group has the opportunity to firmly focus down on its strong organic development programme and so continue to deliver excellent growth in the UK for the foreseeable future.”