Poundstretcher has revealed falling turnover and profits for the full year, marking the third consecutive year sales have dropped.
For the year to March 31 2018, the discount retailer saw turnover dip 2.5 per cent to £387 million, while its gross profits grew 6.8 per cent to £37.2 million.
Over the same period, its pre-tax profits dropped nearly 25 per cent to £2.07 million and its EBITDA fell from £11.2 million in 2017, to £10.7 million.
It attributed the significant drop in profits to increased distribution and admin costs, and warned that its activities were affected by the “underlying economic climate”, which included “a number of risks and uncertainties”.
‘‘There is a gulf separating the discounter success stories (B&M, Home Bargains) from those who have struggled (The Original Factory Shop, and Poundworld, prior to its collapse earlier this year),” GlobalData’s senior retail analyst Hannah Thomson said.
“Poundstretcher’s results indicate that it is in danger of falling on the wrong side of this divide, after a third consecutive year of falling sales.
“Poundstretcher is reforming its store estate, closing older stores and relocating to out-of-town retail parks. That store sales fell despite increasing space through a net increase of nine stores, and relocations to larger-format stores, is particularly disappointing.
“Nevertheless, Poundstretcher has been undeterred from its strategy to open more stores. Since March it has snapped up 40 sites previously occupied by Poundworld and will reportedly acquire 20 from closures of The Original Factory Shop.
“Its new stores trade under the name Bargain Buys, hopefully bypassing any brand damage caused by the Channel 4 documentary Saving Poundstretcher, which exposed the tired state of its struggling, older stores.
“But Poundstretcher should not expect its highly ambitious expansion strategy (to have 800 stores by 2022) to be effective in papering over the cracks of in its existing estate, which totals almost 400 stores.
“Improving the instore environment in these stores, as well as relocating and opening new ones must be a priority, if it is to compete in an increasingly crowded market.”