Poundland shares fall 20% on slumping profits

The acquisition of 99p Stores boosted revenue towards the end of the quarter

Shares in Poundland slipped more than 19 per cent to 225.9p (PA)

Shares in Poundland have sunk 20 per cent following reports of falling sales and profits.

Shares in Poundland slipped more than 19 per cent to 225.9p, well below the 300p at which it listed on the London Stock Exchange last year.

Poundland has struggled with sales over the third quarter. It said sales were down 2.8 per cent on the same period last year, while underlying pretax profits were down 26.3 per cent at £9.3 million.

Jim McCarthy, chief executive, said the acquisition of 99p Stores, the rival firm it took over in September, had boosted the results slightly.

“Since [the 2013 financial year] 99p Stores' performance has suffered from a combination of a lack of investment in infrastructure as well as poor execution of its strategic plan,” McCarthy said.

“During the longer than anticipated CMA process, the business suffered a further reduction in sales following a withdrawal of credit insurance, which in turn reduced stock in stores and resulted in a further downward spiral in sales.”

Despite that, it said the deal remained attractive and that the early improvements in sales from the first converted stores were “very encouraging”.

It still expects a £25 million boost to earnings from the acquisition.

Keith Bowman, equity analyst at Hargreaves Lansdown, described the 99p Stores transaction as “one of two steps backwards to make one forwards” and said “investor confidence near term is being further tested”.

Poundland also warned that highly volatile trading conditions so far its third quarter meant its performance “depends more than ever upon the last six weeks' trading towards Christmas”.