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Poundland Fundamentals (PLND)

Poundland Group plc’s Progress Trounces Tesco PLC & WM Morrison Supermarkets plc!


By Motley Fool | Thu, 18th June 2015 - 11:49

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Today's full-year results leave us in no doubt that Poundland plc (LSE:PLND) occupies a niche on the 'happy' side of the structural changes sweeping the retail market for 'essentials' in Britain.

On a constant currency basis, total sales are up 11.8%, like-for-like sales up 2.4% and underlying pre-tax profit up 18.6% -- the firm's business is flying.

Robust growth

The company reckons structural change occurred in shopping throughout the UK over the last several years, and Poundland played an important part in the outcomes.

When we think back, it seems clear that discounting retail firms prospered in the financially austere environment we've seen since last decade's credit crisis. The discounters were on the rise before that, of course, but a value-hunting collective mindset seems well entrenched in the consuming populace, and it will surely remain for years to come.

A retail environment like that is fertile ground for new-order discount-retailing, and Poundland, Lidl, Aldi and others caused disruption to a number of sub-sectors in the retailing industry. We only need to look at the carnage in the supermarket sector with firms such as Tesco (LSE:TSCO) and Morrisons (LSE:MRW) to see the effects.

As Tesco and Morrisons fight to survive, let alone to thrive, Poundland -- which sells a fair amount of food -- is growing like mad. During the year, the firm opened 60 new stores across Britain and Ireland and plans to open a further 60 at least during the current year. Then there's growth abroad as the company probes into Spain, fine-tuning its offering there and on track to place 10 outlets in the near future. The company has around 588 shops now, so these expansion figures are impressive. If the firm succeeds in its bid to take over rival 99p Stores, growth will receive a further boost.

The new 'defensives'

The key indicators of strength at Poundland are those relating to sales. Tesco and Morrisons can aim to rebuild plunging profits all they like, but if the top line doesn't grow, or worse still if it shrinks as it has been with those supermarkets, ultimately their businesses are going nowhere and neither is an investment in their shares.

We used to prize supermarkets for their steady and reliable cash flow, which allowed those firms to pay consistent dividends. Investors regarded them as 'defensive' investments, and low risk even if short on excitement, but not any more. The recent collapse in profits and share prices in the traditional supermarket sector stripped the supermarkets of their defensive credentials and turned them into struggling turnaround candidates -- a far racier proposition than many conservative investors signed up to.

Will supermarkets ever come back? I wouldn't bet on it. The new reality in the 'essential' retail market is here to stay. Structural change doesn't suddenly change back again. That's why I think it makes much more investing sense to align ourselves with the new order if we can rather than clinging to the old. We can't invest in Aldi or Lidl because those firms are private limited companies, which is a pity. However, we can invest in new-order discounter Poundland and I think the firm is well worth running a slide rule over.

Jefferies International Buy 346.30 346.30 260.00 400.00 Upgrades

Skinny, yr post 18 Jn15....agree that there is a "New Order" -
1) on the one-hand there are niche high-street shops where price probably doesn't matter.
2) there are supermarkets for most folks who compete with the same-stuff so while they might cut a deal with Mfr, they need to stock that Brand, or risk losing customers who don't care too much about price.....but insist on Named brands for their children ( POWER od Advertising!).
3) The discounters - as you say Lidl, Aldi (private) and Poundland [PLND], which has the ability to transform its products and layout to more nearly match Lidl - if it needed to.


I can't see the Big supermarkets doing this - they have costs and shareholders to consider and would need to change rather too quickly - and their customers might take fright, before they were replaced by the Poor-Masses.


It's History
I was surprised that Woolworth didn't adopt the Lidl model; but their chairman had never heard of Lidl - seems he employed someone to do the domestic shopping. Maybe wasn't the right man for the job anyway. Did he retire from the City with a full pension?

EDIT (2Nov2015)--Been watching TV series on Pound-Wars . . . interesting but does show there's an issue with the "Everything is £1" - when so much everyday stuff is costing over this figure . . . so soon enough the Discounter is going to address this or face falling numbers. It's expensive to reduce the box-size and consumers may feel they're duped..... I suspect they need to adopt the £2 coin - and retain the "poundland" moniker . . .
EDIT(1Dec2015)- 225p, up a tad from 2015-Low. I guess it never was worth the IPO price, but many thought it was.... and certainly their shops aren't going to empty too soon. Some of their stuff is "Budget quality" agreed, but at £1 it's no big steal. Also many items are regular "Brands" like chocolates and they may be in smaller boxes - but that's not "cheating" - it means folks can buy a £1 present to gives more-than a passing smile. Reading glasses at £1, I've spares tucked away. I just don't think you can complain about any goods. At £1 folk find them very acceptable - and deep-down we all like to "Rummage for a Bargain". If you need to touch-up a door-frame, then £1 buys you a neat tin of Gloss...and for another £1 several brushes.
Just because you ( RecentPost ), are earning £ots so £1-products don't appeal, etc., there are hundreds of folks for every One in yr Tax-bracket.
....and a very Merry Xmas to you too!
EDIT (16Dec2015)- seems two Dir like 215 sp and have bought lots. Whilst this is commitment and showing those IPO-higher prices were just that.
EDIT(16Feb2016)- I agree with Cynic that they need an on-line presence, although they control the shops that way, it's not too difficult to "invent" a phantom shop where the goods are already sold ( so each "shelf" represents another Order, for example)......but with 99p settling-in I guess we may have to wait.
I just wonder that their PROSPECTUS wasn't a tad economical - sure Xmas was "Bad" for the High Street, but surely that "Trend" was already showing?
BTW I saw 2016 large Dir purchases nearly £800k - DYOR.
EDIT (18March2016)- Did I read there is a new CEO arriving? ( sp now 174p). EDIT Kevin O'Byrne
EDIT (8May2016)-sp dipped to 140, then sprang to 180, now about 168p

Discounting goes to the share price as well

Poundland shares have been hurt more than most this morning, after the retailer warned that pre-tax profits are likely to underperform given a tough Christmas period. One resounding feature of this Christmas was the relatively serene highstreets, with shoppers instead reverting to online shopping. It is this lack of online presence which has been Poundland’s undoing. Coming just two months after the shares dropped over 20% following another profit warning, this marks a worrying trend for a firm which has typically outperformed following the 2007 crisis.

Dividends received today being reinvested should mark the turn in the recent decline in the sp having hit one brokers forecast it is now time towards to head towards the others who have penciled in £2+

RNS today . . . DYOR.
So that's it . . . a possible T.O. as Execs can't move the business to where they told us (i.e. at Floatation, remember? ).....
Not exactly dissimilar ( apart from Obvious Timescales ), like the BHS debacle - swap Pensioners for Shareholders, if you get my drift.
Does anyone know when/Where the AGM will be? _ Would be nice to see the calibre of these Execs.... before they jet-off to holiday-land. Grr.

AGM last year 17/09, Q2 Trading Statement Oct and 19/11 Interim.

Trying a cheeky short on the spreads, back inside B/B target 180p tight stop.

Broker Forecast - HSBC issues a broker note on Poundland Group

BFN

HSBC today reaffirms its hold investment rating on Poundland Group (LON:PLND) and raised its price target to 195p (from 160p).

Story provided by StockMarketWire.com

ATEST BROKER VIEWS

Date Broker New target Recomm.
16 Jun Liberum Capital 160.00 Hold
16 Jun Beaufort... N/A Hold
16 Jun HSBC 195.00 Hold
16 Jun Peel Hunt 300.00 Buy
16 Jun Jefferies... 195.00 Hold
15 Jun Peel Hunt 300.00 Buy
15 Jun Liberum Capital 160.00 Hold
13 Jun Jefferies... 135.00 Underperform
13 Jun Peel Hunt 300.00 Buy
8 Jun Canaccord... 220.00 Buy
Broker Recommendations for Poundland Group

Chris

What % stop loss , 5% ?

222p alders.

Chris

It was the same man who pulled out of the Home retail bid , chance he do it again

No idea, it's just a punt alders.

Out for a tiny loss, like watching paint dry. Results were awful, never understood the concept. If Steinhof don't make a bid their credibility less than zero. Read they have until 13th July to make a bid or not, a lot can happen between now and then.

Poundland's woes started with the competition commission wanting something to do.

Then PLND made things worse by lack-lustre integration of another business nearly their own size.
Add-in the gradual slow-down in foot-fall ( Esp. when wet!) and you can see that PLND profits are likely to be hit.

Was that sp realistic at £3...? possibly not - that's was when I bought and it's halved. But still the shop is "good value" for customers and whereas Woolworths expected a per-visit spend about £3, PLND is probably £10 . . . allow for inflation that's still double . . . .

Poundland does sell tech-items "over £1" - but they are keeping that very quiet, to avoid a big-rush..... look at their Website.
EDIT (13July2016)- Seems now Dirs think 222p is a fair-price to bail-out. Huh! So why did we need expensive new CEO to manage the phones?