How Poundland made its millions

The cost-of-living friendly bargain store is rumoured to be cooking up an IPO - it's even signed Jane Asher...

by Andrew Saunders
Last Updated: 27 Nov 2014

Formative years

Bargain store Poundland first hung its trademark turquoise-and-yellow shingle outside a shop in Burton-upon-Trent's Octagon Centre in December 1990. Founders Dave Dodd and Stephen Smith were inspired by the success of one-price-fits-all US chains like Dollar General (which turned over $16bn in 2012) and reckon to have introduced the concept of 'price point retailing' to the UK.

Poundland certainly struck a chord with cash-strapped punters in the nation's post-industrial rustbelt. By eking out meagre budgets with cut-price deals on everything from baked beans and instant coffee to sticky tape and floor cleaner, Poundland now serves 4.5 million customers a week.

Recent history

In 2002, Poundland became an early beneficiary of the burgeoning private equity bonanza when Advent International coughed up £47.5m for 78% of the firm. But it was the aftermath of the 2008 crash that really put Poundland on the map.

The demise of historic rivals left prime sites on high streets across the land up for grabs and Poundland was one of the few firms in a position to take up the leases. It is estimated to have gained £60m in extra sales from the 2009 collapse of Woolworth's.

A year later, Advent sold to Warburg Pincus for a cool £200m. By then, Poundland was turning over £510m from 260 stores. Now it's rumoured that Warburg Pincus is itself looking for the exit, mulling over a float for early next year that could value Poundland at £800m.

Who's the boss?

It's a pound store with a decidedly premium approach to management talent. As well as ex-Tesco FD Andrew Higginson as non-executive chairman, CEO Jim McCarthy is another retail heavyweight, having previously been MD of Sainsbury's Local. His ambition is to expand the chain to more than 1,000 stores 'in time'.

The secret formula

Poundland - whose sales are all in-store rather than online - has managed to avoid the ignominy of raising its prices. Although the fact that its Irish arm is called Dealz (where everything sells for a rather less snappy 1.49) does suggest that this is becoming harder to maintain. The trick is to make sure that every genuine bargain is offset by items that sell for a pound but don't cost anything like that much to source. Its latest coup is a Jane Asher-branded bakeware range.

Don't mention...

Workfare. The chain bailed out of the controversial unemployment scheme, after geology graduate Cait Reilly successfully sued the DWP in 2012 for making her work in Poundland in return for her Jobseeker's Allowance.

VITAL STATISTICS

Sales:

£880m

Gross profit:

£323.4m

Ebidta:

£45.4m

Stores:

458

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