Launch of discount chain hits Budgens

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The Independent Online
THE COSTS of launching the Penny Market discount chain held back profits at Budgens, the supermarket group, writes Heather Connon.

But the company said the chain's performance was improving and that it remained confident discount retailing would grow strongly.

The nine Penny Market stores lost pounds 1m in the 53 weeks to 1 May, while converting them from the Budgens format cost a further pounds 600,000.

Christian Williams, a Budgens director, said sales in the stores had initially dipped as traditional customers shopped elsewhere, but they had overtaken previous levels. Prices were about 15 per cent below a traditional Budgens supermarket.

Six more stores are planned this year and 40 by the end of next, all in the South-east where, Mr Willams says, few discounters operate. The openings are being carried out with the German group REWE, which runs the Penny Market discount chain in Germany and has a 29.4 per cent stake in the group.

The Penny Market opening costs saw group profits before tax fall from pounds 6.2m to pounds 5.4m on sales 1 per cent lower at pounds 281.8m - slightly better than expected following a profits warning in April.

Earnings per share were 2.8p, down from 3.4p, but the total dividend was held at 1p with a 0.7p final. The shares held at 26p.