Credit: Thisisace/Wikimedia

Poundland's share price just fell off a cliff

The discount retailer's shares plunged by more than 20% after disappointing profits.

by Jack Torrance
Last Updated: 02 Mar 2016

Poundland has been booming in recent years but big expectations often lead to big disappointment. That’s clear from the reaction to today’s interim results, in which the company announced its profits had dropped by 43.5% to £5.3m and like-for-like sales were down 2.8% in the six months to September 27.

To make matters worse, chief exec Jim McCarthy admitted that trading conditions in the current quarter were ‘highly volatile.’ Hence the 20% fall in Poundland’s share price to 222.5p, its lowest level since the company floated last year at 300p.

Credit: Yahoo Finance

The lengthy acquisition of its rival, 99p Stores, hasn’t helped. The takeover was put back substantially by the intervention of the Competition and Markets Authority, which finally approved the deal in September. On the plus side, McCarthy says early signs from the stores that have been converted are good.

‘We now plan to accelerate the conversion programmes so that the vast majority of 99p Stores will be converted by the end of April 2016,’ he added. ‘We're confident of achieving at least £25 million of incremental EBITDA from the acquisition and we are now increasing our UK & Ireland store target from 1,070 to 1,400 stores.’

He’s certainly not taken his eye off the prospect of rapid growth. Poundland opened 52 net new stores in the period and increased its total UK and Ireland store target by 40% to 1,400 (it currently has around 640).

There’s certainly a big demand for discount stores, even if these results weren’t what investors were hoping for. Revenues at B&M jumped 25.8% in its interim results, published earlier this week, and Poundworld is on the march too. Poundland has a tough fight ahead.

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