Shares in Poundland have crashed after it reported falling first-half profits and sales and warned of “highly volatile” trading conditions in recent weeks.
The discount retailer made a profit before tax and one-off items of £9.3m in the six months to 27 September, down 26% from £12.6m a year earlier. Total sales advanced 6.2% to £561.1m, while like for like sales – at stores open for at least a year – fell 2.8%.
The company opened 57 stores in the UK and Ireland in the first half – with 30 in September alone – up from 34 in the same period last year.
Poundland shares dropped 20% to 222.7p after the results announcement on Thursday.
Jim McCarthy, the chief executive, said: “Our Christmas range is our best ever. However, we have seen highly volatile trading conditions so far in the third quarter. The quarter’s performance therefore depends more than ever upon the last six weeks’ trading towards Christmas.”
The chain is digesting its acquisition of its single-price rival 99p Stores, which are being rebranded to Poundland – this means a 1p per item price rise for customers. After a lengthy competition inquiry, Poundland completed the £55m deal in September, adding 250 branches of 99p stores to its 640 Poundland stores in the UK. It also has nearly 60 shops in Ireland and Spain, which trade as Dealz.
It aims to have the vast majority of 99p Stores rebranded by April 2016, and said early sales from converted stores were encouraging. McCarthy said: “The 99p Stores acquisition is a transformational deal for us, adding the equivalent of five years of UK organic growth and 40% to our store numbers in one go. We’re confident of achieving at least £25m of incremental [earnings before interest, tax, depreciation and amortisation] from the acquisition and we are now increasing our UK and Ireland store target from 1,070 to 1,400 stores.”
Independent retail analyst Nick Bubb said: “The key thing was whether Poundland could revive City sentiment and its ailing share price by talking in detail about the strength of the 99p Stores synergies and the trading outlook.”
He added that even though McCarthy “gives it a good go” the fall in profits, dip in like-for-like sales and the volatile trading warning clearly did not thrill investors.
