Poundland profits suffer after ‘unprecedented’ change

Poundland storeImage copyright
Reuters

Poundland’s purchase of rival 99p Stores has hit profits after the discount chain went through an “unprecedented” year of change.

Latest figures show that annual pre-tax profits tumbled 83.7% to £5.9m, although sales rose 18.7% to £1.3bn.

Stripping out the 99p Stores acquisition, profits fell 13.5% to £37.8m on sales up 9.3% to £1.2bn.

This week, South African retailer Steinhoff said it could make a takeover bid for Poundland.

Poundland had seen its shares fall sharply as it struggled to integrate 99p Stores, which it took over in September 2015.

However, Jim McCarthy, the departing chief executive, said on Thursday that adding its smaller rival’s stores to Poundland had strengthened the group.

“After a period of significant change, including an unprecedented integration programme at pace, Poundland now has a unified estate of over 900 stores,” said.

“The retail environment remains challenging, but with our significantly enlarged store portfolio, greater scale and ability to focus fully on trading our stores, I believe we are well placed to make progress in the year ahead.”

Strain

But Poundland said in its statement that the 99p purchase “naturally placed a strain on the core business”.

Poundland shares have jumped this week after Christo Wiese, Steinhoff’s chairman, said he was interested in the UK because it would be a “good fit”.

Poundland told investors to take no action as there was no certainty an offer would be made.

Steinhoff owns Pep, a retailer with 1,800 stores across 10 countries in southern Africa that sells discount clothing, footwear and homewares.

Earlier this year, Steinhoff pulled out of a takeover battle for Argos-owner Home Retail Group. leaving the way clear for supermarket chain Sainsbury’s.

The South African company also failed to take over French electricals chain Darty.

Since 1990, Poundland has opened about 600 shops in the UK, Ireland and Spain, and has plans to open 16 new shops a year for the next two years in the UK and Ireland.

The retailer sells everything at the single price point of £1 in its UK stores. It also has operations in Ireland and Spain under the name of Dealz.

Poundland profits suffer after ‘unprecedented’ change

Leave a Reply

Your email address will not be published. Required fields are marked *