Poundland Q1: growth in challenging environment

Date : 27 January 2021

Lucy Ingram

Retail Analyst

Poundland's parent, Pepco, has released its Q1 trading update, for the first quarter ending December 2020. The group as a whole saw revenue growth on a constant currency basis of 9.1%, but like-for-like sales declined by 2.1%. Poundland and Dealz performed well, with positive revenue and like-for-like growth. We look at the performance in more detail and consider how the retailer's evolution will help it drive growth in 2021.

Poundland and Dealz grow revenue and like-for-like sales

  • Revenue: €564m (£500m)
  • Year-on-year revenue growth, on a constant currency basis: +8.4%
  • Reported revenue growth: +3.2%
  • Like-for-like revenue growth: +2.4%
  • Number of stores: 1,031
  • Stores year-on-year: +8.8%

The results followed a similar pattern in H1 2020, for the six months ending 31st March 2020, when Poundland and Dealz enjoyed +2.7% like-for-like growth. 2020 was a challenging year for Poundland, though, with 130 temporary store closures in April due to reduced footfall. The stores were re-opened in May, but the variety discount channel as a whole struggled with reduced footfall throughout the year.

Poundland's continued evolution drove growth, with the extension of product ranges, such as PEP&CO clothing and homeware, having a positive impact. Shoppers are also increasingly responding to the additional price points, with multi-price participation growing to 23.2% of revenue, from 14.1% in FY20.

Driving growth in 2021

Our ShoppperVista data shows claimed store usage in Poundland between October and December 2020 was 37%. This was an increase, compared to the July and September period where usage was 35%. However, compared to the period between October and December 2019, when usage was 47%, there is still some way to go for the retailer to get back to the levels seen before the pandemic started.

Poundland's proposition development will be more important than ever in the challenging trading conditions that are expected to lie ahead. In 2020 shoppers visited variety discounters less, as they conducted reduced shops across fewer channels. This is likely to continue to be a problem if COVID-19 restrictions remain in place.

While there has been a gradual increase in shoppers returning to the variety discounters, it will be important for them to continue to offer shoppers more reasons to visit. Poundland's growing grocery range will help drive frequency of visit and grow basket size. It will also help it to differentiate from other variety discounters, such as Wilko and Poundstretcher, while bringing it closer to the larger grocery range seen at Home Bargains.

Although shoppers will not be able to conduct a full shop with Poundland or Dealz, the high value proposition will continue to resonate with shoppers. Particularly if and when the pandemic's impact on the economy are felt. More households are likely to be looking to save money on everyday essentials, and Poundland's proposition will appeal. 

Confident about the future

Poundland started 2021 facing into more challenges, once again temporarily closing 44 stores. Despite this, Pepco remains positive about the year ahead, stating;

"We anticipate that the consumer backdrop will remain challenging in the short-term. However, with our established growth strategy, centred on significant future store expansion within a structurally advantaged discount retail segment, and strong financial base, we believe that our future growth opportunity is greater than a year ago. Accordingly, we remain confident about our prospects for continued growth across Europe in the balance of the financial year and beyond."

Going forwards the retailer's focus will be on continuing to reduce operating costs, rolling out its new chilled and frozen range, and expansion of the Dealz estate. 18 new Dealz stores were opened in the quarter, growing the portfolio by 19%. The business remains on track to open 70 new stores in the full financial 2021 year.

Want more insight on Variety discounters globally?

To understand the opportunity provided by the variety discount channel globally, read Variety discount: the channel’s global growth opportunity. In it we look at leading variety discount retailers from around the world and consider where and how suppliers can benefit from the channel’s growth.