Discounter Poundland (PLND) takes a pounding as a poor festive trading statement triggers further downgrades. CEO Jim McCarthy (pictured below) bemoans lower high street footfall over the crucial third quarter and now expects annual pre-tax profit to weigh in towards the lower end of a £39.8 million-to-£45.8 forecast million range.
There was pressure on Europe's leading single price retailer to revive flagging sales in the Christmas run-in; the third ended 27 December includes both Halloween and Christmas and historically contributes half the group's annual earnings before interest and tax (EBIT).
Today's update fails to relieve that pressure, the shares down the best part of 10% to 173.6p as McCarthy warns the volatile trading conditions highlighted at the interims (19 Nov) continued into Q3. Total sales, stripping out Dealz trial stores in Spain, grew almost 30% to £424.9 million, yet this growth is flattered by acquired 99p Stores.
Unfortunately, Poundland boasted its strongest ever Christmas and Halloween product offer, but growth in the core Poundland estate was curtailed by a perfect storm of weak high street footfall, adverse weather condition and the irresistible consumer migration online.
Investec Securities' Kate Calvert swipes 17.5% from her year-to-March pre-tax profit forecast, now pitched at £29.8 million and downgrades her March 2017 estimate by 5.6% to £52.5 million. House broker Shore Capital cuts its annual pre-tax profit forecast from £32.5 million to £29 million and takes its March 2017 estimate down 6.5% to £53.6 million.
Poundland's update isn't entirely a tale of woe however, as the retailer highlights strategic progress on several fronts. New store openings continue apace and there's positive commentary on the £55 million 99p Stores acquisition, a property deal adding 40% to the estate and beefing up the retailer's South of England footprint.
Twenty five stores have speedily been converted to the Poundland fascia, the bulk of the estate will be converted by the end of April and McCarthy still expects to generate 'incremental EBITDA of at least £25 million from the acquisition.'
Elsewhere, the Spanish Dealz trial is going well, with a tenth store opened in the quarter and sales up from £2.3 million to £4.5 million year-on-year. Poundland also flags well-advanced plans to use Family Bargains stores bagged under the 99p Stores deal to launch a new multi-price format, with a trial due to start in April.