http://www.ft.com/cms/s/0/210c96f0-ba0e-11e0-b7a9-00144feabdc0.html#axzz1TqowDXMe
SAMEER SAYS
THIS IS A CLEAR CUT SIGN OF DEFLATION.
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SAMEER SAYS
THIS IS A CLEAR CUT SIGN OF DEFLATION.
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Poundland, the discount retailer that has grown rapidly on the high street in recent years, is poised to become the first of the UK’s growing ranks of pound stores to expand abroad.
The retailer, which has 347 stores in the UK, is to open six stores in the Irish Republic in a €2m ($2.8m, £1.7m) deal, which it says will form the stepping stone to a potential network of several thousand stores to span mainland Europe.
In Poundland’s UK stores, everything from toothpaste to sandwiches and Shakespeare DVDs is sold for £1. However, the fixed-price format will be adapted for its European stores, which will trade as
“Dealz”. Shunning the obvious choice of “Euroland”, the new name gives the retailer flexibility to vary price points.
“Research we’ve conducted with consumers in Ireland and Europe shows the name Dealz transcends the language barrier,” said Jim McCarthy, chief executive of Poundland.
Describing the Irish stores as “the logical first step”, he added: “We will go into mainland Europe, and we’re currently researching which countries would be most suited to our retail proposition. There are countries in eastern and western Europe which test positively.”
The first four Irish stores will open by early October, with two more to follow by next March, creating 120 jobs. Mr McCarthy said there was potential for “four figures of stores” throughout Europe in due course.
Poundland claims to have a 14 per cent share of the UK’s £36bn discount general merchandise market, making it the largest player in a fragmented sector.
Reporting an 81 per cent rise in operating profits last June to £21.5m on a £510m turnover, it is on course to report record results this month.
The potential for the discount store model to work over a wider territory has been shown in the US, where three chains – Dollar General, Family Dollar and Dollar Tree – have 20,000 outlets between them.
In Europe, discount supermarkets such as Aldi and Lidl perform well, but European “pound shop” equivalents tend to be localised businesses which operate much smaller stores offering a limited range of products.
Poundland’s rapid expansion has been fuelled by private equity firm Warburg Pincus, which took a 75 per cent stake in the company in a £200m deal last year. The retailer’s strong cash generation has enabled it to self-finance its expansion with low levels of debt.
“The discounters Poundland, Home Bargains and B&M Retail are among the most impressive, entrepreneurial retailers we have in the UK at the moment,” said Clive Black, retail analyst at Shore Capital. “If the proposition is right, there’s every reason to believe they could have a go at France, Benelux and Spain.”
Noting Germany’s high exposure to discount supermarkets, he disputes that this could be a barrier for Poundland in the same way it has been for supermarkets Tesco, Walmart and Carrefour, who are notably absent. “Primark went into Bremen last year, and the Germans are organising coach parties to visit the store,” he added.
Nick Bubb, retail analyst at Arden Partners, added; “Pound stores aren’t just a UK phenomenon”.
“Even the more affluent economies like Germany have a big discount sector, and the Aldi carparks are famously full of Mercedes cars. Poundland performs strongly in the north and Midlands, yet upmarket Twickenham is one of its best-performing stores. Considering where consumer spending and the retail property market is heading, it is bound to be a successful sector,” he said.
The retailer, which has 347 stores in the UK, is to open six stores in the Irish Republic in a €2m ($2.8m, £1.7m) deal, which it says will form the stepping stone to a potential network of several thousand stores to span mainland Europe.
“Dealz”. Shunning the obvious choice of “Euroland”, the new name gives the retailer flexibility to vary price points.
“Research we’ve conducted with consumers in Ireland and Europe shows the name Dealz transcends the language barrier,” said Jim McCarthy, chief executive of Poundland.
Describing the Irish stores as “the logical first step”, he added: “We will go into mainland Europe, and we’re currently researching which countries would be most suited to our retail proposition. There are countries in eastern and western Europe which test positively.”
The first four Irish stores will open by early October, with two more to follow by next March, creating 120 jobs. Mr McCarthy said there was potential for “four figures of stores” throughout Europe in due course.
Poundland claims to have a 14 per cent share of the UK’s £36bn discount general merchandise market, making it the largest player in a fragmented sector.
Reporting an 81 per cent rise in operating profits last June to £21.5m on a £510m turnover, it is on course to report record results this month.
The potential for the discount store model to work over a wider territory has been shown in the US, where three chains – Dollar General, Family Dollar and Dollar Tree – have 20,000 outlets between them.
In Europe, discount supermarkets such as Aldi and Lidl perform well, but European “pound shop” equivalents tend to be localised businesses which operate much smaller stores offering a limited range of products.
Poundland’s rapid expansion has been fuelled by private equity firm Warburg Pincus, which took a 75 per cent stake in the company in a £200m deal last year. The retailer’s strong cash generation has enabled it to self-finance its expansion with low levels of debt.
“The discounters Poundland, Home Bargains and B&M Retail are among the most impressive, entrepreneurial retailers we have in the UK at the moment,” said Clive Black, retail analyst at Shore Capital. “If the proposition is right, there’s every reason to believe they could have a go at France, Benelux and Spain.”
Noting Germany’s high exposure to discount supermarkets, he disputes that this could be a barrier for Poundland in the same way it has been for supermarkets Tesco, Walmart and Carrefour, who are notably absent. “Primark went into Bremen last year, and the Germans are organising coach parties to visit the store,” he added.
Nick Bubb, retail analyst at Arden Partners, added; “Pound stores aren’t just a UK phenomenon”.
“Even the more affluent economies like Germany have a big discount sector, and the Aldi carparks are famously full of Mercedes cars. Poundland performs strongly in the north and Midlands, yet upmarket Twickenham is one of its best-performing stores. Considering where consumer spending and the retail property market is heading, it is bound to be a successful sector,” he said.
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