Will discount retailers take a pounding or be quids in?

At a time when serious questions are being asked about Leeds-based Asda's future strategy given its focus on cheaper products rather than premium, will the likes of Poundland and Huddersfield-based rival Poundstretcher still appeal to shoppers when we're no longer in recession?

Warburg Pincus obviously thinks so, as does Poundland's chief executive Jim McCarthy, who will continue to run the company. Mr McCarthy said there are significant opportunities for future growth. "We see an increasing numbers of consumers who are seeking value for money while not compromising on quality," he said.

Poundland, Europe's largest single price discount retailer, has performed well in the economic downturn as cash-conscious shoppers sought out bargains.

Discount chains have also benefited from the collapse of Woolworths. Retail research group Verdict estimated that discount chains took about 60m of sales from the collapsed retailer.

Poundland, which has 17 stores in Yorkshire and the Humber, is keen to open another 50 sites this year including new stores in Pontefract and Halifax.

But will they continue to outperform once the market picks up?

Poundland believes that the 1 model is resilient both in periods of recession and economic growth. The company said the UK discount retail market, which is currently worth around 24bn, is expected to grow a further 22 per cent by 2014, exceeding nearly every other retail sub sector.

It is a view echoed by research group Verdict which believes the popularity of pound shops will continue as consumer concerns switch from rising energy prices, food inflation and slowing wages to low job security, pay freezes and negative housing equity.

As a result, it believes that poundshops will continue to move into mainstream retail.

"Already the stigma previously attached to shopping in such outlets is disappearing," said Verdict's senior retail analyst Matt Piner. He believes that consumers are starting to see value as something to aspire to, replacing previous aspirations of premium luxury.

This shift has been helped by value retailers starting to stock well-known brands at cheaper prices than high street counterparts. They have also acquired a new respectability by opening outlets in prime locations.

Verdict believes that budget retailers will continue to benefit from the woes on the high street.

They were able to buy stock from the administrators of fallen companies such as Woolworths, The Pier and Rosebys

However, there will be some risks ahead. Verdict says that discounters face cost pressures on stocks bought from overseas due to the strengthening dollar, but unlike other retailers they don't have the option of putting up prices to pass on these increases.

Mr Piner says that this negative can also be a positive.

"Poundland is in a really strong position because it has a price that it can't go above. Suppliers know it's not a bluff, they can't go above that price," he said.

Face value of big-name bargains

Poundland hit the headlines last week when it emerged that skincare creams that cost up to 8 at Boots were selling for 1 in Poundland under a new label.

Customers who bought the bargains peeled off the labels to discover Boots own label No7 and Botanics products.

The majority of items

were creams and bath products from Boots No7 or Botanics ranges.

One woman reported buying Pure Super Firming Body Cream in a Hartlepool Poundland and peeling off the label to find it was Boots No7 Fabulously Firming Body Cream.

The product is now discontinued, but sold for about 8.

Poundland trading director David Coxon said: "We're always on the lookout for amazing value and work with a wide range of reputed suppliers – including big brand names – to deliver this to our customers.

"The fact that stock changes regularly keeps customers coming back, as they know there are real bargains to be found in Poundland."