The boss of Poundstretcher says the discount chain is managing to keep price rises to a minimum as British shoppers rein in spending to deal with spiralling inflation.
Chief executive Aziz Tayub said the business had kept price inflation to between 5 and 10 per cent whilst having to meet higher input costs in things such as freight and fuel.
He told BusinessLive: “My prices have gone up slightly but we are still very competitive.
“Our prices on toiletries are still cheaper than 80 per cent of the discount sector.”
He spoke as the Office for National Statistics reported that retail sales fell in May as households cut grocery spending to deal with the cost-of-living crisis.
Meanwhile, consumer confidence this month hit its lowest level since records began in 1974, according to GfK data.
And supermarket giant Asda said that some shoppers had been asking cashiers to stop scanning items when the till total hit £30.
Mr Tayub said the Leicestershire-based Poundstretcher chain had been on an upward trajectory since offloading shop units tied to onerous high rents and cutting staff numbers following a CVA restructuring a couple of years ago.
New accounts just filed at Companies house show turnover down 20 per cent from £411.6 million to £325.3 million in the year to March 2021 – but showed losses of £45 million turning into a pre-tax profit of £88 million.
Mr Tayub said unofficial figures showed sales had dropped to £277 million in the latest full year to March 2022, due to fewer stores, with pre-tax profits expected to be around £40 million.
The store estate, he said, had gone from 450 to 338 in the past couple of years, with a workforce of around 5,000 – down around 1,000.
However plans to open 50 stores a year over the next three years – including prime city centre locations where rents have dropped – could create another 500 jobs
He said: “The latest accounts to March 2021 are better than we expected.
“Current trading is challenging. We have struggled to get stock from Far East and UK suppliers. There has been a stock shortage after suppliers held back production and China has had a lot of lockdowns and ships have not been able to leave some ports.
“And there’s no doubt customers are holding back on spending money.
“Despite all that we’ve very happy with the £40 million profits in the most recent trading year because that’s on the back of making a loss two years ago.
“We would be happy for that level of profit to continue and are confident that’s what will happen.
“Price rises have come from freight costs and raw materials. Mostly it’s been UK manufacturers putting up prices pretty much every month – it’s been anything from 5 per cent, but one supplier on the food side has put prices up 125 per cent.
“On average out prices have gone up 5 to 10 per cent, but we’ve been saving a lot of costs and have been able to keep price rises down.”
To help with the rising cost of living the business, which is based next to the village of Kirby Muxloe, handed staff a 10 per cent pay rise at the start of the year as a way of saying thanks for helping it through a tough few years trading.
Poundstretcher property and legal director Gerry Loughran said: “The CVA gave us the opportunity to restructure the loss-making stores because of the old legacy leases that many had.
“That had made a significant drag on profits and we were able to close those stores. We’ve also had a significant focus on other costs, and have put investment in energy-saving initiatives such as a more efficient fleet and mechanical handling equipment at the distribution centre.
“Basically we have been able to start from scratch which makes the results for the year to March 2021 feel like a start-up company making an £85 million pre-tax profit.
“We’ve also had margin gains in terms of getting the right sales mix and the right products and higher contributing profit lines.
“There were also rent reductions across the board following what had been artificially high rents.
“We are continuing to restructure the store estate to make it more efficient and have new stores in the pipeline which will be relocations and add-ons, which will take us to about 360-370 stores.
“With new stores we could end up employing 500 more staff. There are now more good units available on the high street at the right rent, so we want to open more high street shops as well as shops in retail parks.
“We can go into prime and edge of prime areas because rents have come down – what’s really killing the high street is rates. The solution is a fairer rates system which takes into account online retailers.”
