Poundland profits up 27% as squeezed shoppers try to save money

Chain opens 400th store and plans more in continental Europe

An influx of squeezed middle-class shoppers has propelled profits at Poundland 27% higher, as the discounter – which sells everything from Fairy washing up liquid to Nestlé After Eights for £1 – opened its 400th store.

Having opened a further 13 stores in Ireland under the Dealz name, the chain plans to double that within the year as well as plotting its first foray into continental Europe.

Jim McCarthy, the chief executive, said he suspected the proportion of AB shoppers, which made up 12% of Poundland’s customers more than a year ago, was now higher. The recession-induced penny-pinching has taken hold in the national psyche and will carry on even when the economy recovers from its four-year downturn, he believes.

“Waste of any kind has become abhorrent. In 1990 when Poundland was created there weren’t many Aldis and Lidls, TK Maxes and Poundlands. Now there are price comparison sites and people shop with their smartphones. There is definitely some structural shift going on in shopping values.”

Poundland, which sells a range of 3,000 items, including 1,000 branded goods, now serves more than 4 million customers each week, up from 3.5 million in 2010/11.

“Poundland is a great business in good times, and a good business in times of tough economic conditions. We have the benefit of those who choose to shop with us, and those who need to shop with us,” said McCarthy.

Turnover at the chain, which is owned by the private equity house Warburg Pincus, climbed 21.6% to £780m in the 53 weeks to 1 April, lifting underlying earnings 26.5% to £40.1m. Like-for-like sales were up 2.3%. Sales of essentials such as food and drink along with household goods and health and beauty products have been strongest, discretionary items less so – apart from affordable treats such as confectionery. Poundland sold more than 6m boxes of Maltesers, 2m umbrellas, more than 2.5m CDs and 500,000 garden gnomes during the past year. In good times, up to 40% of sales are impulse purchases; during a recession that figure falls to about 30%.

A new warehouse will open in Hoddesdon, Hertfordshire, next month in addition to Poundland’s two Midlands warehouses and is expected to reduce fuel costs.

The West-Midlands-based retailer opened 62 new stores during the past year, including its largest to date with 1,200 sq metres (13,000 sq ft) of shop space in Wolverhampton, and plans to keep expanding at this rate until it reaches 1,000 shops. Stores are also getting bigger – McCarthy believes sales have benefited from wider aisles in the larger shops, which enable shoppers to spot products more easily.

While most of its new store openings are still on the high street, Poundland has been one of the fastest-growing chains in out-of-town shopping malls and now operates in just over 20 retail parks.

It has also set its sights on continental Europe, and has drawn up a shortlist of countries where it wants to launch, although this is not imminent. The discounter will use the Dealz name under which it trades in Ireland, as this has proven popular in consumer research with continental shoppers too. “Euroland” might have been the obvious choice – but “we found that consumers are not happy with anything associated with the euro in Ireland and continental Europe,” said McCarthy.

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