Poundland today reported a ‘record’ Christmas as year-on-year total gross sales surged 12.4% to £348.8m in its third quarter. Prospects for the year ahead, as the retailer eyes a public listing, are positive.

Poundland today reported a ‘record’ Christmas as year-on-year total gross sales surged 12.4% to £348.8m in its third quarter. Prospects for the year ahead, as the retailer eyes a public listing, are positive.

Despite all the talk of economic recovery, the average consumer is yet to really feel it; Conlumino’s December sentiment survey showed just 16% of people felt financially better off than the previous year, with a significant 28% feeling worse off.

So this festive period finding value and hunting out bargains were still very much on the shopper agenda. While many retailers had to resort to promotional events to meet these demands, Poundland has them at the very heart of its offer and, unsurprisingly, that made it a popular destination, particularly for small gifts and fripperies.

It is in these smaller seasonal outlays that it makes particular sense for consumers to trade down, particularly if they can still get well known brands for their money Indeed it is this aspect of its product mix, along with more consistency in what it stocks in stores and superior store merchandising standards, that has even seen Poundland outperform its other fixed price rivals, and begin to attract more affluent AB shoppers.

The next question is whether it will maintain this momentum through 2014 and, over this time frame. Its prospects look good. It has converted many former Woolworths shoppers into diehard customers in recent years and, even if the country does live up to this year’s optimistic economic forecasts, the hankering for a bargain among UK shoppers is unlikely to disappear overnight.

However, there is also perhaps a need for caution. Despite Poundland’s rapid growth to over 500 stores, chief executive Jim McCarthy states that in ‘due course’ it is ‘on track’ to have over a 1,000. This is a huge increase in scale, against a backdrop of supermarkets continuing to expand their presence in similar locations and consumers potentially cutting back on their trading down, as their disposable incomes gradually improve.

The bigger risk, though, perhaps lies on the supply side. The recession, with its retailer collapses and desperate suppliers, has led to an abundance of the sort of deals on which Poundland thrives. As this changes, Poundland might find it increasingly difficult to get the right products at the right prices – particularly if it is having to stock a store portfolio which is twice its current size.   

Matt Piner is research director at Conlumino