Poundstretcher slipped into the red last year after battling fierce competition among the value players and investing in a refit programme.
The value retailer posted a £3.7m loss in the year to March 31, down from a £1.6m pre-tax profit in the prior year, according to accounts filed at Companies House.
Poundstretcher’s like-for-like sales fell 2.1% in the year, while sales rose 5.7% to £368m.
Poundstretcher secretary Martin Collinson said: “The discount trading environment in which the company operates is an increasingly competitive and challenging one.”
The retailer has previously said its older high street estate needs updating to compete with newer players such as Home Bargains and B&M Bargains.
Poundstretcher opened 18 new stores and refitted 86 of its 400 shops in the period. It closed 15.