99p Stores wins backing for 45 more outlets

A bargain basement retail chain started by the Tanzania-born entrepreneur behind the Whistlestop and Europa food chains is planning to double its national presence over the next two years before a likely stock market flotation.

99p Stores, which was set up five years ago by Nadir Lalani, has secured an £8m cash injection from its venture capital backers to open up to 45 new stores by early 2008. Trading at the discount chain, which undercuts its main rival, Poundland, by a penny, is holding up against the wider retail market as consumers search out knocked-down goods.

The group hopes the expansion drive, which is being funded by Barclays Venture and Lloyds TSB, will more than double its £100m annual revenues. Most of its 46 stores are in the South, although it has outlets as far north as Liverpool.

Mr Lalani, whose family owns 51 per cent of 99p Stores, said the concept "appealed to everyone". As well as stocking staple lines, it buys up job lots of clearance stock from big names such as Marks & Spencer. "We are a mixture of Netto [the Danish discount supermarket group], Woolworths and Superdrug," he said.

Current like-for-like sales are running 4 per cent ahead of last year, which is a slowdown from the 8 per cent achieved in 2004. The group is on track to deliver profits of £3m this year and £7m next year according to Mr Lalani.

The 55-year-old entrepreneur, who built up the Whistlestop railway station food chain before selling it to Compass in 2001 for £18m, said he hoped to hand control of his business to his two sons in 2008. The company is a family affair and the three Lalanis do most of the buying.

Barclays Venture, the bank's funding arm for nascent businesses, took a 24 per cent stake in 99p Stores two years ago. The remaining stake is split between Mr Lalani's friends and business associates. The Lalani family has yet to take any cash out of the business.

Khilan Dodhia, the director at Barclays Venture, said: "The concept has been so successful we wanted to accelerate the growth." He said an initial public offering was a "likely route for us" given that the main American dollar stores were all listed.

Poundland, owned by the private-equity group Advent International, is talking to advisers before its own possible flotation. It is sounding out potential buyers for the 140-strong chain.