This week, Poundland announced strong results, with sales rising 15% to £880 million and pre-tax profits growing 29% to £23.1 million for the year to March 31.

This week, Poundland announced strong results, with sales rising 15% to £880 million and pre-tax profits growing 29% to £23.1 million for the year to March 31.

These results are the latest to highlight the growing popularity of value retailers among consumers.

In light of this success, the retailer, which is controlled by private equity group Warburg Pincus, has said it wants to more than double in size to 1,000 stores in the UK, and is also plotting an expansion into Europe. So how did Poundland become so successful and what might the future hold for the retailer?

Poundland first began trading in 1990, initially selling products that were often just cheap imitations of what you could buy elsewhere.

However, over time, Poundland has developed its product offering to sell branded goods and is starting to outcompete supermarkets and other general merchants.

Poundland’s success is therefore essentially down to its ability to sell the products that consumers want to buy, at the price they want to buy it.

This is even more impressive considering that we would be hard pushed to think of any other retailer that has managed to keep its prices constant over the last 20 years.

These latest results have sparked speculation about a possible flotation, considering Poundland’s current ownership by a private equity firm. 

However, whilst Poundland’s success continues to support a strong investment for owner Walburg Pincus, an investment is only as good as its exit.

Markets are currently open for initial public offerings (IPOs), due to the amount of liquidity that sits with equity investors at the moment.

However, retail stocks are still approached with caution due to the bearing of consumer sentiment. It is important to remember that investors are all consumers as well.

Although they may overlay considerable mathematical analysis in their stock pickings, at the end of the day, when it comes to retail stocks, personal sentiment has a strong influence on whether they decide to hold, buy or sell.

While there is only muted speculation of a float for Poundland, any exit would have to be managed carefully.

Until then, Poundland should work hard to continue its discount offering and look to start dictating its supply chain pricing structures to suit the £1 selling price it needs to hit.