Poundland’s profits slashed by COVID-19 pandemic

Following today’s release of Poundland H1 figures for 2019/20, Hannah Richards, Retail Analyst at GlobalData, a leading data and analytics company, comments:

“The COVID-19 outbreak has severely impacted trading and tarnished its performance in what could have been an excellent half for the Pepco Group. In the five months to February 2020, Pepco achieved 14.4% revenue growth and profit before tax rose 21.8% to £101.4m. Its European fascias, Poundland & Dealz, delivered positive l-f-l revenue growth of 2.2%, and group EBIT was up 16.0% to £120.9m. However, factoring in the additional month of March, when much of Europe went under lockdown measures, group profit before tax came crashing down by 16.3%, to £77.8m, and group l-f-l growth only just remained positive at 0.7%.

“Pepco was agile in its response to COVID-19, with cash preservation front of mind, withdrawing outstanding orders from suppliers and achieving c.£262m worth of stock deferrals and cancellations. The group cut discretionary expenditure to reduce operating costs, and capitalized on government support in the UK in the form of furloughing staff and reduced business rates. In doing so, Pepco has remained sufficiently liquid to persevere through a sustained period of reduced demand, and continues to pursue expansion within the UK post coronavirus.

“Though Poundland qualified as an essential retailer and much of its store portfolio remained open, reduced town centre footfall and absence of a transactional website was not enough to compete with the strong performance from the likes of B&M, which achieved l-f-l sales growth in the UK of 22.7% across the eight weeks to 23 May 2020. Despite a temporary spike in demand for cleaning, healthcare and food products as consumers turned to stockpiling, demand was not sustained as supermarkets quickly began to restock shelves and product availability from online retailers improved.   “Although Poundland’s value positioning will appeal as consumer confidence remains dampened by COVID-19, high street and shopping centre footfall is expected to remain subdued for quite some time as shoppers remain hesitant to visit busy shopping locations. Therefore, Poundland is at a significant disadvantage compared to rival discounters such as Home Bargains and B&M, which allow shoppers to buy online and have a greater out of town presence which are likely to be more favourable locations over H2 2020.”

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