Despite the seemingly inexorable popularity of discount retailers even they haven’t been immune to lukewarm high streets. Poundland just announced that profits will be at the lower end of forecasts for the year. Analysts anticipate pre-tax profit of £42.6m (with forecasts from £39.8m to £45.8m).
Its total sales growth in the 13 weeks to December 27 (excluding Spanish operations) was up 29.4% to £424.9m, but that was primarily driven by its acquisiton of the 99p Stores Chain, which was completed towards the end of last year.
Jim McCarthy, Poundland’s chief executive, said, ‘Our Christmas and Halloween ranges were our best ever. However, the trading conditions that we experienced in November continues through the third quarter, with high street customer numbers down year-on-year and this has impacted sales growth.’
The discounter had warned of volatile Christmas trading two months ago, but shares still dipped 8.5% in wake of the latest news.
On the plus side, the retailer does still intend to have the conversion of 99p Stores completed by the end of April – bolstering its presence in the south of England, where it isn’t quite so ubiquitous as it is elsewhere in the UK. ‘We remain on track to open around 70 net new Poundland and Dealz stores in the UK and Ireland in the full year,' McCarthy added.
Poundland flourished during the recession, but investors may be increasingly sceptical about its ability to battle ever increasing competition, or indeed whether discount retail could fall out of favour as the economy recovers.
The retailer hasn’t stood still – as well as the 99p Stores acquisition, it has also experimented with relaxing the single £1 pricing strategy, including selling more expensive items on Black Friday.
The discounter is though, playing catch up in some respects when it comes to online. Not wholly unexpected considering its dependence on physical stores, but Poundland only branched out to offer an online shopping service in September last year, with a delivery charge of £4 and five days delivery time. Streamlining and improving this aspect of the business could help it steal a march on its rivals in the online space and aid its expansion ambitions, rather than seeing them stall.