Poundland is aiming to be quids in for years to come

The store is confident its strategy remains sound as it eyes an £800m float

City bankers will soon be asked to invest in a store that most of them have never set foot in in their lives.

Despite that, bosses at Poundland are convinced the single price point retailer has the potential to be worth up to £800m when it lists on the stock market early next year. JP Morgan and Credit Suisse have been appointed to scout out investors, and the Poundland chairman, Andrew Higginson, is wooing City friends he made during his time as Tesco’s chief financial officer.

Some might ask how long Poundland can remain at a single price point, and will there not become a point when a renaming to Two-Pound Land or even Five-Pound Land might be needed?

The chief executive Jim McCarthy thinks not, and believes the £1 price point, which has been in place since it launched in 1990 can remain for decades to come.

He said: “We’ve been around for 23 years at £1 and can certainly stay there for many more years. Look at the US, where Dollar Tree has been trading for 50 years selling everything at a dollar since day one.”

Indeed, Dollar Tree, which started in 1953, continues to trade well in the US and Canada. With more than 4,500 stores, a turnover of $7.4bn and a profit of $619.3m, it nestles in the Fortune 500 list of the biggest US companies.

It listed successfully on Nasdaq in 1995, and shares hit an all-time high two weeks ago.

Poundland’s ambitions to list could  be coming at a good time, with several successful listings in recent months, most notably Merlin Entertainment in the UK and Twitter in the US.

But how can Poundland keep prices at the same level? Bosses explain that while 10 years ago, customers could buy 10 chocolate bars for £1, they will now only get four for the same price. Five years ago, £1 could buy you 45 pencils, but now you might get 10.

Sometimes entire brands will be removed from shelves to make way for cheaper alternatives. A few years ago, the cost of instant Nescafé became so expensive for the company it was making a loss. Nescafé was discarded, and replaced by Maxwell House in a new sized pot on which Poundland could make the margins it wanted.

Mr McCarthy explained: “When commodity prices impact on products we sell as multipacks, then we consider reducing the number of items in the pack, but this is always done against a background of value differential.  If we weren’t able to offer outstanding value then we would delist the product from our range.”

This close relationship with suppliers is key to the company’s success, and as the value of £1 falls, management are in constant discussions on how to reduce sizes and redesign entire brands so they can fit in with the price point.

Suppliers are happy to co-operate as pound stores continue to be successful and as expansion takes hold – Poundland wants to double its portfolio to 1,000 – the retailers’ power continues to grow.

Analysts believe Poundland in particular has the potential to grow faster than its rivals thanks to its dominant position and the savvy way management have quickly moved into some of the stores left empty by administrations including Woolworths and Peacocks.

Fears that sales could be lost when the downturn ends have also consistently been allayed by Mr McCarthy, who points out the strongest growth the company achieved was before the 2008 financial crash.

Last year, its 450 stores recorded a 14.6 per cent jump in profits to £323.4m in the year to end of March, with sales up 15 per cent to £880m, with 4.5m customers a week. Shore Capital expects sales to pass £1bn next year, with profits up to £378m.

The company also has Europe to play with, thanks to its international arm Dealz, which operates in Ireland and is set for expansion on to the Continent. Unlike Poundland, Dealz had the foresight to be launched with multiple price points, which could keep the business running for years to come.

Making the pennies count

Coca-Cola

Previously sold 4 cans for £1

Now 3 for £1

Dairy Milk

Previously sold 150g bars

Now sells 120g bars and introduced own-label bars

Coffee

Previously sold Nescafé

Now sells Maxwell House

Sugar

Previously sold 1.5kg bags

Now sells 1kg

Disposable paper cups

Previously sold 80

Now sells 60

Wooden coat-hangers

Previously sold 3-pack of grade B wooden hangers

Now sells 2-pack grade A wooden hangers

Items now sold due to inflation:

Argan hair oil (50ml) – typical value is £3

Mini 4-pack of hair clips (typical value in Claire’s £4.50 for 6).

Milk Tray 95g exclusive to Poundland

Healthy snacking bags including pumpkin seeds and chocolate-covered cranberries

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: C++ Developer – Hedge Fund – New York

$80000 - $110000 per annum, Benefits: Bonus and Employee Investment Scheme: Se...

Selby Jennings: Java Developer Enterprise Specialist –Paris,France

€30000 - €50000 per annum, Benefits: Competitive Bonus: Selby Jennings: Java D...

Selby Jennings: QA Engineer Lead – Hedge Fund – Chicago

$60000 - $90000 per annum, Benefits: Competitive Bonus and Employee Investment ...

Selby Jennings: Buy Side Sales / Account Manager – Fixed Income Market Data – Frankfurt Germany

circa 65,000 EUR + Bonus + Benefits: Selby Jennings: Recruiting a Sales Associ...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible