Poundland’s advertising once trumpeted “Yes! Everything’s £1!” but that pledge could be ditched as the bargain chain’s new owners move into clothing sales.
Andy Bond, the former Asda boss who now heads Poundland as the boss of Pepkor Europe, an arm of South African group Steinhoff International, which bought the retailer for £610m in September, said he wanted to introduce the group’s Pep & Co clothing to every store – and it would not all be priced at £1.
Full 2,500 sq ft Pep & Co outlets will go into 10 Poundland stores from next February and Bond said there was room for them in at least 50 of Poundland’s 900 outlets. Smaller stores will feature a few racks of clothing, focusing on kids and womenswear.
“The relationship between Pep & Co and Poundland will become increasingly significant. My ambition is that, over time, Pep & Co will become to Poundland like George is to Asda,” said Bond.
The model follows that of GHM!, the six-store budget retail chain launched by Bond in the summer which will now be folded into Poundland.
Bond said no decision had been made on what would happen to the pricing of Poundland’s other products but he admitted that experiments were taking place. For more than a year, the chain has been occasionally discounting items to 90p or 80p or pushing bigger items for £8 or more.
Bond said: “We will always anchor Poundland around the trust of £1 pricing but the research from the business isn’t that people shop there because things are £1 but because they get amazing value. There are some areas where sticking to £1 doesn’t let you have a credible offer - like toys and clothing.”
Bond said trying out a range of prices was something all single price retailers in the UK were looking at. “The journey pound stores are going on is the same as the dollar stores in the US,” he said. “The vast majority of them have moved from single price to multi-price - from one price to a small number of prices.”
The fall in the value of the pound against the dollar, the currency in which much of the non-food goods sold in Poundland are bought in from the far east, is only likely to add to the pressure for change.
Single price retailers have less options to cope with inflation. In the past, it has meant “shrinkflation” – reducing the size of packs so that they can still meet the £1 target, but that has attracted criticism from consumer groups.
Bond said: “I’d be foolish to say that we don’t shrink products on occasion as we clearly do but there are other solutions – like moving to own label versions or just pushing back on suppliers.”
He said Poundland could choose to stop selling items which it did not think were good value and said predictions of inflation in the price of clothing, food and other goods next year was ”slightly hypothesising”.
Bond said Poundland had taken out insurance against its exposure to the dollar well into next year and there were factors at work in the global economy that may help to offset the 15% fall in the value of the pound since June.
“The Chinese currency has moved so you can negotiate better cost prices in China while Chinese industry is not having the best of times so there is extra capacity and that can also make things easier,” Bond said. “It is not obviously true that we are going to see retail inflation in goods denominated in dollars.”
Regardless of the inflation threat, Poundland has been experiencing difficulties recently. Pretax profits crashed nearly 84% to £5.9m in the year to 27 March and like-for-like sales dropped 3.9% as Poundland suffered from indigestion after swallowing rival 99p Stores – a takeover that took more than a year to complete partly because of the intervention of the competition watchdog.
Competition from the major supermarkets also increased as they cut prices to become more competitive with the likes of Poundland and grocery discounters Aldi and Lidl.
Bond said Poundland’s performance had now improved and he was optimistic about the prospects for the Christmas trading period. He admitted the market was tough but said Poundland would benefit from getting back to basics after bedding down the former 99p Stores.
“Poundland used to be famous for the rate it brought new items to the market. What you’ll find over the next 12 months is more getting back to what the business does really well – great value and interesting new low-price items. We will be more innovative and fleet of foot,” he said.
