Poundland shares slide as profits fall amid volatile trading

Pre-tax profits were down by more than a quarter, to £9.3 million from £12.6m a year ago. Chief executive Jim McCarthy said this was due to higher costs of Poundland's expansion in Spain and its figures had suffered in comparison to its unexpectedly strong performance last year, partly boosted by the loom bands craze.

At the same time Poundland is braced for its most important Christmas period in years in the wake of its £55 million takeover of 99p Stores.

Mr McCarthy said this morning the Black Country-based £1-for-everything chain was waiting to assess the impact of Black Friday on shopping patterns over Christmas, but said trading so far had been 'volatile".

In the run up to Black Friday, he said: "We have seen some weeks that have been up and weeks that have gone the other way. It makes me a little bit nervous."

Investors were unhappy with the profit fall and recent sales, and shares in the Willenhall-based group were down 20% in the first few hours of trading on the stock market today.

Meanwhile Poundland has launched its own small scale Black Friday sale, offering kitchenware and Akai headphones online.

And it has revamped its offering of Christmas products, including glass baubles "as big as your fist", said Mr McCarthy. And it is piloting a Christmas TV advert, although it is only showing in the Yorkshire and Tyne Tees television area.

Overall sales were up 5.6%, at £561 million, although on a like-for-like basis – stripping out the impact of new stores – they were down 2.8%.

But the Willenhall-based company said the success seen in the 20 99p Stores so far converted to Poundlands meant it was now accelerating the change-over and expected to have nearly all the 252 stores converted by April next year.

It is predicting a £25 million boost to its earnings from the takeover and has now upped its long term target to having 1,400 Poundlands across the UK and Ireland.

At the same time it is keeping the multi-price format of around 30 bigger 99p Stores, some of which trade as Family Bargains, as part of an experiment that might be rolled out to the rest of the business.

Mr McCarthy also said that the introduction of the new National Living Wage would cost Poundland £4m next year, and around £17m-£18m by 2020. To cope with the extra cost Poundland is trying to get more of its goods supplied ready to go straight on to the shelves – currently just six per cent turn up that way. And it is introducing hybrid checkout tills that can work as self-service as well as be operated by staff.

The company is also increasing the user of cheaper LED lighting in its stores, which has so far cut electricity bills by 30-35 per cent.

Aside from the 99p deal, a wave of 52 new shops so far this year means Poundland has 640 branches across the UK and Ireland, as well as a 10th about to open in Spain. Founded 25 years ago by former Willenhall market trader Steve Smith and his father, who later sold up for £50 million, the group has kept its head office beside the Black Country Route at Willenhall. With a major distribution centre at Bilston it employs around 700 people across the Black Country.