Poundland has reported rising full-year sales and profits in its maiden prelim update since floating in March. Retail Week takes a look at the City reaction.

To read Retail Week’s story on Poundland’s update click here.

The discount sector as a whole is becoming increasingly competitive with B&M Bargains recently valued at £2.7bn ahead of its own floatation.

Meanwhile, Poundland has managed to raise £26m to fund 150 new stores over the Next three years. With 528 stores though, Poundland already dwarfs its nearest rivals in the single-price sector, 99p Stores and Poundworld.

While Poundland has earned itself pole position in this sector, it is a proposition that is easily replicated with brand loyalty likely to prove an elusive concept. With this in mind, having the most extensive store presence would seem to be key to maintaining its leading position as shoppers typically choose whichever pound shop is most convenient.

Poundland is said to be considering launching online, but with the jury still out on whether single-price retailers can succeed with an ecommerce offer, physical expansion would seem to be the sensible priority. If Poundland was to look for an example of a successful growth story for single price retailers, it need only glance across the pond, where US chains Dollar Tree, Family Dollar and Dollar General are busily snapping at the heels of retail giant, Walmart.

A public listing and meteoric sales growth suggests that Poundland is putting the foundations in place to drive-single price retail forward even as austerity begins to fade. David Alexander, Conlumino

 

Like-for-like sales growth in the year was 1.9%, at the upper end of our expectations (1.5 to 2%). With 1.4% already reported for the first 9 months, our analysis suggests like-for-like growth in Q4 increased to an impressive 3% to 3.5%.

Strong trading momentum has been sustained through Q1, with total sales reported up 18% to £262.6m, considerably ahead of our full-year 2015 forecast growth of 12% at this early stage of the year. Gross profits in the period increased by 13.9% to £368.5m, with gross margin rising 19bp to 36.9%, benefiting from building buying power, and store mix migrating to the higher margin Dealz and retail parks where store numbers increased to 85 (from 35).

Such factors more than offset the adverse impact of inflation and the increased participation from branded goods sales, which nudged up 30bp to 63.4% of sales. That said, we do not anticipate the outstanding Q1 momentum will be maintained as comparatives toughen, particularly through the second half. As such, we have kept our sales forecasts unchanged for now, so growth of 12.2% driven by new stores and with like-for-like contributing 1.5%. Darren Shirley, Shore Capital

 

The evidence from the likes of Greggs, WHSmith and Tesco/Sainsbury’s convenience chains was that the high street was vibrant and Poundland has taken full advantage. There is an extra few days of the Easter holiday in this [Q1] sales result, which may have added up to 2% to the headline number but overall sales growth of 18% implies like-for-likes of 6%. That is an excellent effort and while Q1 is a small quarter in profits terms, it is clear that momentum is very strong here.

Suppliers continue to try to help Poundland evolve the range, and new lines such as Nail Bar and the kitchen range are helping too. In our view the investment case is compelling. There is a strong new store roll-out programme and the opportunities in Ireland and Europe are interesting.

Clearly the Poundland offer is resonating with customers (not many retailers are showing 6% like-for-likes right now) and we see no reason why that would change. With the dividend opening up the shares to a new group of investors, we think that continued outperformance is likely. Jonathan Pritchard, Oriel

 

In full-year 2014, Poundland delivered 25% growth in underlying profit after tax to £27.3m. This was 1% above our estimate of £27m. Like-for-like growth of +1.9% exceeded our expectations.

In our opinion, this is a strong set of maiden numbers and sets the company up well to deliver further growth in the current year. Poundland has reported 18% growth in sales in the first quarter of full-year 2015.

The year has started well, giving us confidence. Poundland’s first Dealz store in Spain has opened its doors in Torremolinos, a resort town on the Costa del Sol. We see significant long-term potential for Poundland’s venture into Spain. Alexander Mees, JP Morgan Cazenove

Poundland reveals rising sales and profits in maiden results update