Poundstretcher warns of price rises despite CVA store closures

Poundstretcher
Poundstretcher has opened 23 new stores since the beginning of April

Poundstretcher has warned that product prices will rise in the lead up to Christmas as chief executive Aziz Tayub pledges to soak up some of the potential rises from big brands including Coca Cola, Fox’s, Kellogg’s and Heinz.

Over the last half year, the discount retailer has recorded sales of £140 million, despite a CVA and additional external cost pressures.

Pre-tax profits for the same period were £23 million, even though Poundstretcher entered a CVA last year.

READ MORE: Poundstretcher posts £80m profits after redundancies

The CVA was launched in an effort to tackle high rents by closing stores and implementing 200 to 250 redundancies.

Poundstretcher’s turnaround saw pre-tax losses of £49.5 million to March last year, turn into pre-tax profits of £30 million this year.

Tayub’s management team is cautiously predicting pre-tax profits of £40 million for the full current financial year and contributes this to lower rents and fully re-stocked warehouses.

Poundstretcher has opened 23 new stores since the beginning of April, taking its store total to 365 nationwide.

Growth plans include 12 additional openings in the run-up to Christmas with approximately 12 roles being created in each.

The chain employs around 5500 people and around two-thirds of its stock comes from China with the rest from the UK and Europe.

“We have got no shortage of stock – we have plenty of imported stock and plenty of UK stock, which is enough to fulfil our sales targets right up to next March,” Tayub said.

“He attributes supermarket stock shortages down to selling stock faster but insists Poundstretcher stores have sufficient Christmas gifts and stocked shelves.

“We do not see our prices going up as much as others partly because we are very careful about what we buy.

“We have had a lot of negotiations over food and toiletry supplies from the UK over potential price increases in the next few months – brands such as Coca Cola, Kellogg’s, Heinz, Britvic and Fox’s biscuits.

“I understand there will be increases of 3-5 percent in the next few months and I think it’s more down to worldwide raw material costs.

“Here in the UK the labour shortage and higher energy costs will affect us later on and maybe some of our suppliers are trying to anticipate that too.

“There might be a second price increase at some point, which would be when we have to act. But it’s not easy finding alternative suppliers for branded products – it is something that will affect us next year.”

Poundstretcher has a small fleet of 30 trucks, which has not been adversely affected by wider HGV driver shortages.

Tayub continued: “We are in the discount sector so are a little bit more secure. People come to us because our range is getting better and our prices are reasonable.

“We also do not have the issues other players will have, like supermarkets, who constantly have to refill their shelves with food and toiletries.

“We might have lost a couple of HGV drivers, but we have replaced them.

“We use a small number of hauliers, particularly in Scotland, but they have been very good with us because they are medium and small transporters and their prices have not gone up.

“It’s never going to be easy, but we are confident in our businesses because we have the right model, the right strategy and the right offering for the customer.”

Click here to sign up to Retail Gazette’s free daily email newsletter

LEAVE A REPLY

Please enter your comment!
Please enter your name here