Poundland Q4 Trading Statement
Total +11.4% (£1.1bn)
Excluding Spain/actual currency
(All results for 12 months to 29 March 2015)
Poundland has this morning posted a robust set of results for its Q4 and FY trading periods. Over the year as a whole, total sales grew 11.4% (actual currency) to £1.1bn, with LFL growth of 2.4%. Trading in its most recent quarter was slightly less spectacular, with total sales climbing 6.5% (actual currency) to £255.0m. While for many retailers an uplift of this nature would be extremely positive, this represents a slowdown on the growth of the past two financial years. The retailer again highlights the impact of the timing of store openings and the lower contribution from new store openings compared to last year as the major reasons for this drop off in growth.
Poundland opened a further 15 outlets this quarter in the UK and Ireland, bringing its total store openings during FY15 to 60. The retailer now trades from 547 stores in the UK, and 41 in Ireland; an indication of its dominance of the single-price space. Elsewhere, it has continued its trial in Spain, and now trades from five stores in the country.
This quarter also saw Poundland signal its intention to take over rival 99p Stores for £55m, to further extend its dominance in the UK discount market. However, the retailer’s plans are now subject to an investigation by the Competition and Markets Authority (CMA), which has concerns over Poundland creating a monopoly, especially in 80 areas where both chains currently operate. In order to achieve the takeover, the retailer would have to consider selling 80 stores. Nonetheless, the deal would still significantly increase Poundland’s scale and footprint in the UK and Ireland.
This period saw Poundland introduce a new range of 200 DIY products. This represents another string to its bow, providing a direct challenge to the dominance of big-box players Homebase and B&Q in the faltering UK DIY market. The retailer hopes that, despite a decline in interest in DIY from the British consumer, its low price-points will prove more appealing than the high cost of hiring a tradesman, helping it to partially offset this Done For You (DFY) trend.
Overall this represents another impressive set of results for Poundland, with the real milestone-revenue reaching the £1bn mark — now achieved. Poundland is flourishing in its home market, where the discount culture and thrifty mind-set of the British consumer looks here to stay, even as wider macroeconomic improvements should see the average British consumer having more money in their pocket. Further range development, such as a widening of its grocery offer, and new store openings (both on an organic basis, and the potential 99p Store takeover) are now likely to be the major routes to future gains.
However, Poundland is likely to find future growth more challenging. The UK discount space has become more crowded, with single-price rivals Poundworld and Poundstretcher continuing to expand and discount general merchandisers such as Home Bargains and B&M doing the same. With a continuing uplift in volumes being the primary route to growth in this sector, as the market becomes more competitive, growth via this medium will likely prove harder to come by.
Furthermore, if, as expected, the Big Four grocers begin to show more tangible signs of a sustained recovery, this is likely to prove a further threat to retailers like Poundland, with much of their growth over the past five years coming off the back of the wider woes at the grocery giants. Indeed, as the likes of Tesco and Asda continue to invest in price and promotion in an aim to win back customers, Poundland will need to work harder to ensure its low-cost credentials, and its wider appeal, are not undermined.
Source: Conlumino Viewpoint 14 April 2015