Amid the changing consumer habits in the UK at present, discount stores are expanding at a previously unknown rate as households attempt to cut down on spending and stick to a weekly budget. This has played a huge part in Poundland’s hugely successful year, with the retailer reporting rising sales and growing profits thanks to its tactic of rapid store expansion.
In the year to the 30th of March, Poundland sales rose to reach almost £1 billion, with the £997.8 million total marking a 13.3 per cent increase from the £880.5 million sum recorded a year previously. Furthermore, the three months to the end of June indicate that a further year of strong sales growth is on the cards, with total sales amounting to £262.2 million – an 18 per cent rise from the same period last year, during which sales worth £222.6 million were recorded.
Unfortunately, despite the strong performance, annual pre-tax profits dropped by 18.9 per cent to £21.5 million on a comparable basis. Yet the company claims that this was due to the cost of its stock market flotation earlier in the year – a claim backed up by the fact that, when the impact of one-off spending was stripped out, underlying pre-tax profits rose by 23.5 per cent to £36.8 million.
Chairman of Poundland, Andrew Higginson, remains confident that customers will remain loyal to the discounter despite the recent upturn in the economy.
He says; “These results show that we are continuing to build on our strong growth record, as set out at the time of the IPO.
“I expect that Poundland will continue to benefit from its strong trading platform, its universal appeal and the structural change in consumers’ shopping behaviour.”
During the financial year, Poundland opened a total of 70 new stores in the UK, bringing its commercial property portfolio up to 528 outlets. However, in an interview with BBC Radio 4’s Today programme, chief executive Jim McCarthy revealed that the retailer will not be resting on its laurels when it comes to further increasing its rate of new store openings.
In fact, Poundland is now setting its sights towards doubling its UK store portfolio, aiming to own and operate around 1,000 outlets in the UK. However, Mr McCarthy believes that this may be too modest a target, and expressed an opinion that a network of around 1,400 stores would be entirely achievable based on internal research.
Furthermore, Poundland used the last financial year to look beyond British shores, and last Wednesday opened its first Spanish store in the holiday resort of Torremolinos. Over the next two years, this store will be joined by a further ten new openings across the country as Poundland aims to capitalise on the combination of a high British tourism presence and continuing economic uncertainty in major Spanish cities.
With the City praising Poundland’s strong performance and consumers continuing to flood through its doors, it seems that the discounter has become an unstoppable force on the high street. However, as the economy improves, it will be interesting to see whether Mr Higginson’s confidence is justified, or whether more traditional retailers return to favour with consumers.
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