Poundland defies downturn

The group – which sells everything for 1 – reported a doubling in annual profits to 20m in the year to March 28 and said it is well positioned to cope with the looming downturn and the prospect of public sector workers losing their jobs later this year.

The group, which has 17 stores in Yorkshire and the Humber, will open the new Halifax store next month and Pontefract is due to open this winter.

Poundland, Europe's largest single price discount retailer, warned consumers face a painful squeeze on their finances this winter.

Chief executive Jim McCarthy said: "The pain that we've experienced thus far is likely to be less than the pain that we're going to get from October forward."

He said consumers, particularly those in public sector employment, have lost confidence, a situation made worse by falling house prices and the prospect of a VAT rise in January.

"Consumers feel hard pressed and under pressure. Their confidence in the future is pretty shattered," he said.

He said that Poundland, which thrived through the recession as cash-strapped shoppers sought value, is "perfectly positioned" to serve customers' needs.

"We have two types of customer. We have those that need to shop with Poundland and other value retailers, and we have those that choose to shop as they seek to preserve their lifestyles and their standard of living," he said.

Poundland, which attracts three million customers a week, said its top selling products are a 12-pack of Kodak Batteries, 1.5kg Whitworths Sugar, Maltesers box, two litre Wisemans milk, Wave Reading Glasses, Johnson & Johnson cotton buds, emergency tent, Rockband DrumSticks, Plush Meerkat and three LED Butterfly lights. Bought by Warburg Pincus in May for about 200m from fellow private equity company Advent International, Poundland sells from a range of 3,000 products, including over 1,000 branded goods.

The retailer, Britain's biggest seller of cigarette lighters and boxed Maltesers, also said the 50 new stores will create 2,000 jobs.

Mr McCarthy, who re-invested "several million pounds" in Poundland as part of the Warburg Pincus deal, sees scope for over 800 UK stores and is trialling out-of-town stores.

Mr McCarthy said: "We get an immediate response when we open a new store and by taking a lower margin than most retailers we build on value rather than profit. The standard of the displays in store and the service is much better than people anticipate."

He said the firm had traded well since the end of March and forecast revenue above 700m for the 2010/11 year.

Operating profits rose 81 per cent to 21.5m in the year to March 28.

Poundland currently employs over 7,500 staff and has 263 stores nationwide. Retail experts believe the 1 model is resilient both in periods of recession and economic growth.

The UK discount retail market is worth around 24bn and is expected to grow a further 22 per cent by 2014, exceeding nearly every other retail sub sector.