Discount chain Poundstretcher has warned that sales are set to drop to £277m in the year to March 2022, attributing this performance to fewer stores, while pre-tax profits are set to halve, falling to £40m.
It comes as recent accounts filed at Companies House showed that pre-tax profit hit £88m in the year ended March 2021, following a loss of £45m the previous year, though turnover for the group was down 20% from £411.6m to £325m.
The group nonetheless pledged to keep prices “to a minimum” as consumers cut spending to deal with high inflation and the cost of living crisis.
Aziz Tayub, chief executive of Poundstretcher, said: “We have reduced prices, and we are the most competitive. Our prices on toiletries for example are still cheaper than 100% of the discount sector.
“Price rises have occurred in many retailers due to increases in freight costs and raw materials, mostly from UK manufacturers putting up prices pretty much every month. Our prices have gone down significantly compared to last year, and we’ve been saving a lot of costs and have been able to keep price rises down as much as possible.”
He added: “The latest accounts to March 2021 are better than we expected. Current trading is challenging. We have struggled to get stock from the Far East and UK suppliers. There has been a stock shortage after suppliers held back production and China has had a lot of lockdowns and ships have not been able to leave some ports.
“Despite all that we’re very happy with the £40 million profits in the most recent trading year because that’s on the back of making a loss two years ago. We would be happy for that level of profit to continue and are confident that’s what will happen.”
Gerry Loughran, Poundstretcher’s property and legal director, added: “We’ve also had a significant focus on other costs and have put investment in energy-saving initiatives such as a more efficient fleet and mechanical handling equipment at the distribution centre.
“Basically, we have been able to start from scratch which makes the results for the year to March 2021 feel like a start-up company making an £88 million pre-tax profit. We’ve also had margin gains in terms of getting the right sales mix and the right products and higher contributing profit lines.”
He added: “There were also rent reductions across the board following what had been artificially high rents. We are continuing to restructure the store estate to make it more efficient and have new stores in the pipeline which will be relocations and add-ons, which will take us to about 360 to 370 stores. With new stores, we could end up employing 500 more staff.