Poundland pins hopes on Christmas trading as profits dip

DISCOUNT retailer Poundland remains in bullish mood despite seeing its profits fall by 43.5% on a year on year basis in the six months to September 27.

Boss Jim McCarthy said: “We have seen highly volatile trading conditions so far in the third quarter. The quarter’s performance therefore depends more than ever upon the last six weeks’ trading towards Christmas.”

While such a fall in profits – down 43.5% to £5.3m (2014: £9.3 m) – will be a concern, it would be difficult to judge the Willenhall-based firm’s half year perfomance too harshly as its saw sales increase by 6.2% to £561.1m (2014: £528.2m).

And the period in question covered Poundland’s “transformational” acquisition of rival 99p Stores, completed in September for £51.5m.

It expects the vast majority of those stores to be converted by April and has identified increased earnings potential of at least £25m.

Poundland opened 52 net new stores during the period, growing the estate in UK & Ireland to 640 stores (2014: 557). Some 30 stores were opened in September.

And the tenth Dealz trial store will shortly open in Spain.

Poundland has now raised its UK & Ireland store target by 40% to 1,400 stores.

At the time of reporting, Poundland had net funds of £66.1m (2014: net debt of £4.4m)

Chief executive McCarthy said: “The 99p Stores acquisition is a transformational deal for us, adding the equivalent of five years of UK organic growth and 40% to our store numbers in one go.

“The early sales uplifts from the first converted stores are very encouraging and 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. 

“We’re confident of achieving at least £25m of incremental EBITDA from the acquisition and we are now increasing our UK & Ireland store target from 1,070 to 1,400 stores.

“The sales comparables in the second half are softer and our Christmas range is our best ever.”