Poundland sees return to sales growth this year

By Sarah Young

LONDON (Reuters) - British discount retailer Poundland (PLND.L) expects to return to underlying sales growth this financial year after its last one was hit by disruption from the acquisition of a rival and the addition of more than 200 stores, it said on Thursday.

The company, which sells everything from washing detergent to boxes of chocolates to packs of batteries for the single price of 1 pound, posted a 4.9 percent drop in underlying sales for the six months ended March 27, its fiscal second half.

Forecasting it was still on track to broadly meet market expectations for full-year profit, Poundland said management focus on converting the 99p Stores it acquired last year and stock challenges arising from the enlarged group had hurt sales at established stores.

Poundland, which increased its store estate by 60 percent in its last financial year, also said a drop in numbers on Britain's shopping streets had taken its toll.

But Chief executive Jim McCarthy, who is due to retire in July, said he was confident the sales decline would reverse in the coming year, in spite of lower footfall levels, as the acquisition bedded down and Poundland traded as one company.

"I'm very optimistic, indeed confident, that we are doing the right things that over the course of the next twelve months, particularly the second half we will see an improving performance in like-for-like sales," he said.

He said he expected those sales to return to Poundland's historic average of flat to 2 percent growth.

Poundland also said the combination with 99p Stores was on track to deliver its targeted earnings benefits, and guided it would open fewer new stores in the current financial year.

Shares in Poundland, which have lost almost half their value over the last six months, traded up 1.1 percent to 149 pence at 0740 GMT.

"We are encouraged that new openings in full-year 2017 will be lower than previously expected as management focus on the core business and the opportunities that should accrue from the enlarged post 99p estate," said Liberum analysts.

The consensus forecast for Poundland's pretax profit before 99p Store trading losses for the year ended March 27 stands at 39 million pounds, from a range of 36-42 million pounds.

(Editing by David Clarke and Mark Potter)