Poundland's sales soar during recession

Poundland delivered record sales for the year to the end of March, as the single-price retailer attracted hordes of new customers seeking value for money during the recession.

The 209-store retailer's total sales soared to about £395m, compared with £330m last year, for the 12 months to 31 March 2009, driven by strong underlying sales growth and 41 new stores. Jim McCarthy, chief executive of Poundland, said: "It is a combination of new stores, strong like-for-like sales, new products and growth in food and drink." Poundland has benefited from the flight to value and a 22 per cent increase in AB socio-demographic shoppers over the financial year, as middle-class families hunt down bargains.

Mr McCarthy declined to provide profit figures, but said: "Operating profit will be ahead, as will [underlying earnings] Ebitda, and debt will be reduced." Signalling its growing momentum, Poundland accelerated its like-for-like sales growth to more than 4 per cent for the quarter to 31 March. This was up on the 3.9 per cent uplift in underlying sales delivered for the five weeks to 4 January.

Mr McCarthy said sales had been growing since 2007. "We are a good business in a recession, but we are an even better one in times of recovery because there is more traffic on the high street and more money in people's pockets."

Poundland started selling two litres of milk for £1 in 20 stores last year and Mr McCarthy said the soaring sales had convinced it to roll out the offer to all its stores that have chillers this year. "Milk for £1 is showing phenomenal growth, so we will be rolling it out to the majority of stores by the end of September," he said.

The retailer is also piloting selling 10 British eggs for £1, and Mr McCarthy said he would anticipate rolling that out as well, but declined to provide a timeframe. While Poundland's food offer also includes 1.5kg packs of sugar for £1, as well as a variety of branded crisps, chocolate and fizzy drinks, it remains a general merchandise retailer and customers cannot do a full weekly shop in its stores. Despite this, the big grocers, notably Asda, have slashed prices on hundreds of lines to £1 this year, interpreted as a response to Poundland.

This summer, Poundland will launch accessories for the Wii video games, including a cover for the console control, followed by attachments for the tennis and golf games before Christmas. Poundland is seeking to add more former Woolworths stores to the ones it had already opened. "We have opened about eight and there are about another 15 in negotiation, but I don't think it will end there," said Mr McCarthy.

Poundland is likely to open about 40 stores this financial year, bringing its total to about 250. For the year to 31 March 2008, Poundland's operating profits rose 122 per cent to £8m, on sales up by 6.1 per cent to £330m. The retailer was bought by Advent International, the private equity firm, in 2002. Mr McCarthy declined to comment on a potential sale or timeframe.