Store openings cost Poundland

Discount retailer Poundland reported a 26 per cent fall in first-half profit, as it was hurt by higher store opening costs. The group added that trading conditions in its third quarter so far have been “highly volatile”.

Poundland store. Photo credit: Dominic Lipinski/PA Wire

It said the third quarter’s performance would depend more than ever upon the last six weeks’ trading towards Christmas.

Poundland had previously guided that it expected profit in its 2015-16 year to be phased towards the second half, when it will open less stores than the first half and when comparative sales numbers are also softer.

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The firm made a profit before tax and one-off items of £9.3m for the six months to September 27, down from £12.6m in the same period last year.

Total sales increased 6.2 per cent to £561.1m but were down 2.8 per cent at stores open over a year.

Poundland opened 55 stores in the UK and Ireland in the first half, compared to 34 in the corresponding period last year.

Following a lengthy competition probe Poundland completed the £55m acquisition of rival 99p Stores in September, adding its 251 stores to about 600 Poundland stores in the UK and nearly 60 shops in Ireland and Spain that trade as Dealz.

Jim McCarthy, chief executive of Poundland, said: “The 99p Stores acquisition is a transformational deal for us, adding the equivalent of five years of UK organic growth and 40 per cent to our store numbers in one go. The early sales uplifts from the first converted stores are very encouraging and we now plan to accelerate the conversion programmes so that the vast majority of 99p Stores will be converted by the end of April 2016.”

Poundland said an incremental core earnings opportunity of at least £25m a year from the deal had already been identified.