More “sensible” high street rents have strengthened Poundland’s plans to add 50 new stores next year – giving a boost to its private equity owners in their bid for a sale of the Willenhall-based business.
The discount retailer is adding the new shops in its next financial year – creating 2,000 jobs – as it keeps up last year’s rapid pace of expansion which saw it add 61 new shops.
Poundland chief executive Jim McCarthy said rental conditions on the high street were helping Poundland’s ambitious store opening plans, which he believes could eventually see it reach 650 stores throughout the UK.
The announcement comes as the firm’s private equity owner Advent International has appointed advisers to review options for an exit of the company, which it bought for £50 million in 2002.
Mr McCarthy said: “We have experienced a much more realistic property market with better conditions from landlords. We are seeing some sensible conditions in terms of rental expectations and that is helping to accelerate our growth.
“And when they let a Poundland, it’s easier to let the adjacent stores because of the footfall that we drive.”
Mr McCarthy said the new stores would not be aimed at one particular consumer group or any type of retail area. “Poundland now has a broad appeal across all socio-demographic groups so we don’t target any particular type of area.
“We know that where there are lots of people, Poundland performs best.”
Mr McCarthy said sterling’s weakness was not a major worry for the firm which imports one third of the goods it sells.
“We are being sensible and we are managing our foreign exchange sensibly,” he said. “It’s a bit more of a challenge when the dollar is in its current state, but we have long experience of handling that.
“We are growing strongly so we are able to leverage that volume. And we are strong enough to delist products that become more expensive and put in new products that are attractive and still offer amazing value.”
Poundland’s continued growth is likely to make it an attractive target for any potential buyer which comes forward.
Advent International has appointed Close Brothers to review options for the firm, which could include a sale to another private equity firm or competitor.
Birmingham-based private equity specialist Owen Trotter, investment partner at Key Capital Partners, said retail was an attractive proposition and Poundland had a particularly robust model – which could see it sell for “certainly more than a pound”.
He said: “It seems retail is the flavour of the month for large buyout houses – there are clear growth opportunities through increasing stores now high street rents are reduced. They are cash generative and if you believe the UK economy is emerging from the recession, given that we are a nation hooked on shopping, the high street should be one of the first places to benefit.”
The last couple of months have seen a mixed picture for M&A activity in the retail sector – with deals such as the float of Superdry clothing brand owner SuperGroup going ahead.
Meanwhile there is intense competition among buyout firms in the bid to snap up arts and craft retailer HobbyCraft after Redditch-based Halfords left the race to purchase the company.
But others deals have fared less well with New Look, owned by private equity groups Apax Partners and Permira, scrapping its flotation plans in February just days after Matalan called off its attempted sale to private equity buyers – who balked at the £1.5 billion asking price.