Poundland, Woolworths with food, is ‘retail winner’
The business reported total sales up by more than 15% to £528.2M, with like-for-like sales up by 4.7%. Earnings before interest, tax, depreciation and amortisation climbed by 17.5% to £20.7M.
Shore Capital City analysts Darren Shirley and Clive Black said the discount store had exceeded expectations. “We see Poundland as a retail winner in the medium-long term, sitting comfortably amongst the attractive convenience, discount and online trends that continue to gain momentum,” said Shirley and Black.
‘A major virtue’
Net debt was just £4.4M, down by £22M year-on-year, despite about costs of £10M linked to the initial public offering. “Poundland is basically ungeared and its strong balance sheet is a major virtue in our view,” said the analysts.
They forecast pre-tax profit of £44M after year-on-year growth of nearly 19.6% and earnings per share of 13.4p – up by 23%.
Poundland’s chief executive Jim McCarthy said the store’s rising sales reflected the changing UK retail landscape and likened the business to Woolworths. “We serve over 5M customers a week,” McCarthy told BBC Radio 4’s Today programme. “Poundland is an essential part of the changes that are happening in UK retail shopping at the moment.
“We do sell over 1000 brands … [of] … food and drink but we are a general merchandise retailer with over 3,500 products in all sorts of areas – stationery, entertainment and garden.”
McCarthy said Poundland had benefited from the failure of Woolworths. “Its demise in December 2008 helped us over the years because we were able to occupy empty Woolworth sites in about 100 places. They [Woolworth] got it wrong but the numbers [financial results] show we are getting it right.”
International expansion plans
In the financial statement accompanying the results, McCarthy claimed strong UK trading was complemented by the business’s international expansion plans. Three multi-price Dealz stores were now trading well in Spain.
During the first six months of its 2015 financial year, Poundland opened a total of 34 stores, with 28 across the UK and Republic of Ireland. The business also opened its first Dealz store in Spain taking the total store estate to 557, compared with 490 last year.
The firm planned to open 60 Poundland and Dealz stores in the UK and Ireland. In Spain it intended to open 10 “low cost, low risk pilot” stores over the next two years.
McCarthy concluded: “While our full year outcome, as always, is dependent on delivering a good Christmas for our customers, I remain confident of further progress throughout the year.”
The big four UK supermarkets have increasingly found their sales squeezed by the rise of discount stores, such as Aldi and Lidl, and the premium retailers, such as Waitrose and Marks & Spencer claiming a growing share of the grocery market.
Earlier this month, Aldi revealed plans to create 35,000 new jobs over the next eight years.
Poundland results: at a glance
- Underlying pre-tax profits up by 34.2% to £12.6M
- Net cash from operating activities, before tax and initial public offering costs up by 31.4% to £20.8M
- Underlying adjusted diluted earnings per share up by 40.7% to 3.84p
Source: Poundland
