Poundland shares have plunged an unprecedented 17% to an all-time low as the company revealed the poor state of the 99p Stores portfolio it has just bought.
Chief executive Jim McCarthy also admitted that recent trading had been tough due to the warm autumn, store refurbishments are costing more than expected, currency fluctuations are affecting the bottom line and the new national living wage will hit profits next year.
Shares fell 48p to 230p.
Pre-tax profits crashed 26.3% to £9.3 million with sales rising 6.2% to £561.1 million in the six months to the end of September.
Like-for-like sales fell 2.8%.
Despite the fall, McCarthy said the UK and Ireland can have 1400 stores up from previous targets of 1000, and pointed out today’s results were against very strong numbers last year.
However, the true state of the 99p Stores estate was laid bare with an extra £14 million needed to upgrade them, while the stores also under performed due to credit insurance being withdrawn during the sales process. It has since been reinstated.
McCarthy said: “It was in a mess and as we expected it to be. The takeover process was long and drawn out and during that time credit insurance was withdrawn, which we knew, although we weren’t told by them.”
It meant shelves became bare and will underperform during Christmas, causing a loss of up to £8 million, although in time bosses reckon the stores will bring in £25 million of profits.
Around 20 99P stores have already been turned into Poundlands, with the majority of the 252 outlets converted by next April.