21st Jan 2015 09:44
LONDON (Alliance News) - Discount retail chain Poundland Group PLC Wednesday said sales rose by around 10% in the third quarter of its financial year, driven by both existing stores and new store openings, while it also said it saw a "record" Christmas trading period.
However, the group's shares were sold off Wednesday as it said sales from its new stores were lower than the year before, due to delays in openings. The shares were down 4.6% at 346.58 pence during the morning, the second worst-performing stock in the FTSE 250 after Afren PLC.
The discount retailer, which sells everything for GBP1 in its Poundland stores and the equivalent from its Dealz stores in Ireland, said total revenue, excluding its five store trials in Spain, increased by 9.8% to GBP328.4 million in the 13 weeks to December 28. If exchange rates had stayed the same, it said sales in the period would have been up marginally more, at 10.2%.
"There was a good contribution to growth from both like-for-like store sales and continuing good performance from new stores during the third quarter. As expected though, due to the timing of our openings, the contribution from new store trading weeks was lower than the corresponding period last year, a continuation of the trend seen in the first half," the company said in a statement.
Shore Capital analyst Clive Black said that whilst this is an undoubted disappointment for Poundland management and investors, it is a short-term phenomenon, saying that it should bode well for growth in the retailer's next financial year.
"We estimate that Poundland's third quarter growth rate was lowered by around 1.5 percentage points due to forgone trading days," Black said.
Whilst Poundland does not reveal like-for-like sales on a quarterly basis, Black says he estimates third-quarter like-for-like sales of between 1% and 2%, which against challenging comparatives is a slow down on the run-rate achieved in the second quarter, estimated at between 3.5% and 4%.
In Poundland's statement it said it opened a net 17 stores in the UK and Ireland during the quarter, and continued with its trial stores in Spain, opening another four stores during the period.
Despite the later-than-expected opening dates for its new stores, the group reiterated that it remains on track to open 60 net new stores in the UK and Ireland this year, and has a "very strong" pipeline for its next financial year.
"I am pleased to report another good quarter of sales growth and a record Christmas trading period. Despite the tough trading conditions, Poundland continued to perform well, and we served more than 7 million shoppers in the peak Christmas trading week alone," said Poundland Chief Executive Jim McCarthy in the company's statement.
"We have managed our costs and cash well, and we are in line with our financial expectations for the year as a whole," said McCarthy, highlighting that the retail chain is well funded to see through its expansion plans.
Shore Capital's Black said that whilst he has shaved his second half sales growth expectations to 10.3% from 11.8%, given Poundland's tight control on costs, he maintains an earnings before interest and taxes forecast of GBP44.7million, representing year-on-year growth of 11.7%.
Black said the structurally strong position of discount retailing in Europe highlights Poundland's strong growth potential, especially if it presses forward with trading in Spain.
"We remain confident Poundland will confirm a very strong full maiden year as a listed entity, with a bright outlook driven by the continued roll-out of stores across both the UK and Ireland, and the prospect of a further medium-term piston of growth in the form of the ongoing Spanish trial," Black said.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
PLND.L