Poundstretcher has struggled despite the customer flight to value, but with the acquisition of 15 Alworths stores the value retailer is out to turn things around

Poundstretcher has struggled despite the customer flight to value, but with the acquisition of 15 Alworths stores the value retailer is out to turn things around

Why are we talking about it now?

Value retailer Poundstretcher acquired 15 of the 17 Alworths stores last week, following the collapse of the ‘son of Woolies’ variety retailer at the end of March.

The deal is expected to save the majority of the 235 jobs jeopardised or lost as a result of Alworths’ demise. All stores will be rebranded to the Poundstretcher fascia.

What is Poundstretcher?

A variety store retailer with 360 stores. It notched up sales of
£300m in the 2010 financial year, when it made a pre-tax loss of £6.8m. It launched a transactional website last year.

What’s its history?

According to Retail Week Knowledge Bank, Poundstretcher lost its way in the middle of the 2000s, following an unsuccessful reincarnation as Instore under the ownership of Pepkor of South Africa.

Following an acquisition by Seaham Investments in 2008, the chain refocused on its value roots, with all core stores rebranded as Poundstretcher by the end of 2009/10.

The company has remained substantially loss-making due to the ongoing repositioning and redevelopment of the business.

The retailer posted a profit in just one of the past nine years. However, it is expected to have bounced back in to the black this year.

What are its future plans?

Boss Charles Kay came on board in January, joining from Netto where he was managing director. Kay hopes to capture the full potential of the retailer in this climate, which is increasingly favouring value operators.

Poundstretcher said in the past that it wanted to rapidly expand to 500 stores by December 2012. It has grown its estate by 50 stores in the past 12 months.

How does it compare with other retailers?

Poundstretcher should have been flourishing in the recession, as cash-strapped consumers flocked to snap up deals. However, the retailer has lost its way in recent years, allowing the likes of Poundland and 99p Stores to steal a march.

Value retailing is proving popular with investors at the moment, with Poundland being bought by US private equity house Warburg Pincus last year, and 99p Stores hiring DC Advisory to consider its options. Wilkinson, Home Bargains and B&M Bargains have also thrived, offering popular brands at low prices.