Poundland has reported more than £1bn of sales for the first time, just as its acquisition of smaller rival 99p stores is paused following warnings from competition authorities that the deal could harm consumer choice.
Lewis Sturdy, dealer at London Capital Group, said:
“Poundland has proved that if you look after your pennies the pounds will look after themselves – £1bn worth of revenue for the first time. Investors may shrug off the competition probe into Poundland’s takeover of rival 99p Stores as operations are cashing up fine. Store openings continue at a pace and Poundland has pencilled in around £45m in pre-tax profits.”
The UK discount retailer, which sells consumers goods at the affordable price of £1 per unit, said full-year sales had risen 11.4% to £1.11bn, driven by 60 new stores in the past year.99p,
Poundland Boss Jim McCarthy commented on UK high street trading, describing it as “tough”, but that the retailer has a “strong” pipeline of new store openings for the current financial year.
“We expect to continue to deliver our growth strategy in the new financial year, notwithstanding some headwinds from a weaker euro and a tough comparable in the first half,” he continued.
The value chain said that underlying pre-tax profits would be in line with market expectations of £43.8m but added that store openings had continued to be slow in the final quarter, resulting in 10 fewer stores being opened over the year compared with the last financial year.
The retailer’s growing popularity, along with other discounters Aldi and Lidl, has transformed UK shoppers’ spending habits in the UK, putting strain on the big four supermarkets.
Poundland, which floated in March last year with a £750m valuation, is attempting to buy rival 99p Stores for £55m but is facing an in-depth investigation from the UK Competition and Markets Authority in relation to its Phase 1 review of proposed buyout.
The company will need to provide suitable solutions to the UK competition regulator’s concerns relating to the reduction of competition in the market, especially in the 80 local areas where the two companies have competing stores and 12 areas where they would be future competitors.
“The loss of competition between the companies may lead to a worsening of their offer locally,” said the CMA.
Poundland has cited that the merger will “provide better choice, value and service for 99p Stores’ customers”. It has until 16 April to respond.