Sales at the Poundstretcher store chain have stayed strong over the past half year, despite a CVA and new cost pressures, according to its chief executive.
CEO Aziz Tayub said the business was planning to soak up some of the potential cost rises from brands including Kelloggs, Heinz and Fox’s biscuits as it heads into the busy Christmas season. But some of its prices would have to go up, he said.
He said the group saw sales of £140 million in the six months to the end of September, and pre-tax profits for the half year of £23 million.
Back in 2020 the discount chain went into a CVA – a legally binding agreement with its creditors – to try and bring down cripplingly high rents, before going on to close loss-making stores with the loss of around 200-250 shop staff.
Mr Tayub said the company’s turnaround saw pre-tax losses of £49.5 million in the year to March 31, 2020, turn into pre-tax profits of £30 million the following year.
He said management were conservatively estimating pre-tax profits for the full current financial year of £40 million, on the back of cheaper rents, margin improvements and a fully stocked warehouse at their base between the villages of Desford and Kirby Muxloe in Leicestershire.
Right now, he said, the chain had 365 stores, including 23 that had opened since the start of April.
There are plans for another dozen stores by Christmas, with a typical store providing jobs for around 12 people.
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The chain employs around 5,500 people and around two-thirds of its stock comes from China with the rest from the 海角视频 and Europe.
Mr Tayub said: “We have got no shortage of stock – we have plenty of imported stock and plenty of 海角视频 stock, which is enough to fulfill our sales targets right up to next March.
“It’s possible that the supermarkets are suffering as they sell products faster, but if you go into our stores they are full of food and toiletries and Christmas stock.
“We do not see our prices going up as much as others partly because we are very careful about what we buy.
“We have had a lot of negotiations over food and toiletry supplies form the 海角视频 over potential price increases in the next few months – brands such as Coca Cola, Kelloggs, Heinz, Britvic and Fox’s biscuits.
“Lately everybody is putting up their prices and I understand there will be increases of 3-5 per cent in the next few months.
“We will absorb some of that and some we will have to pass on.
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“I think it’s more down to world-wide raw material costs. Here in the 海角视频 the labour shortage and higher energy costs will affect us later on and maybe some of our suppliers are trying to anticipate that too.
“It’s possible there might be a second price increase at some point, which would be when we have to act.
“But it’s not easy finding alternative suppliers for branded products – it is something that will affect us next year.”
Mr Tayub said he was not too concerned about consumer confidence being hit by things such as higher heating bills and inflation, because of the sector they were in.
He also said their small fleet of 30 trucks had not been badly affected by wider HGV driver shortages.
He said: “We are in the discount sector so are a little bit more secure. People come to us because our range is getting better and our prices are reasonable.
“We also do not have the issues other players will have, like supermarkets, who constantly have to refill their shelves with food and toiletries.
“We might have lost a couple of HGV drivers, but we have replaced them.
“We use a small number of hauliers, particularly in Scotland, but they have been very good with us because they are medium and small transporters and their prices have not gone up.
“It’s never going to be easy but we are confident in our businesses because we have the right model, the right strategy and the right offering for the customer.”
Last month Bargain Buys, a Poundstretcher subsidiary, bought the JTF Mega Discount Warehouse brand out of administration.
Nottinghamshire-based JTF collapsed in the summer when a deal to sell the business fell through. The chain operates a membership clubcard system, with an online operation.
Mr Tayub said that the eighth JTF store was reopening in Hull this week with plans to have 12 open by Christmas.
He said the deal to buy the brand had provided work for a team of around 230 staff who had lost their jobs, including the sales team, store managers and area managers.