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Market Commentary

Weekly Retail & Leisure News - 20 February, 2015

Retail sales increase over Easter, as Poundland sales hit 1bn pounds

An early Easter and the ongoing economic recovery helped lift retail sales in March, as the sector posted the strongest sales growth seen in nearly a year, according to the British Retail Consortium (BRC). Retail sales in the UK increased by 3.2% on a LFL basis from March 2014, when they had decreased 1.7% on the preceding year. On a total basis, sales were up 4.7%, against a 0.3% fall in March 2014. 

In further positive news this week, Poundland reported strong results, implying that despite the macroeconomic recovery, the discount culture in the UK is here to stay. Poundland's LFL sales rose 2.3% for the 12 months to March 29, up from 1.4% in the previous period. The company reported total sales growth of 11.4% to £1.11bn, on the back of a real estate portfolio that has increased from 190 stores in 2008 to 600 stores.

While impressive figures, future organic growth in the discount sector may be harder to come by, hence Poundland's intended £55m takeover of 99p Stores, in an attempt to increase the scale and footprint of its business, and to help reach its 1,000 store target more quickly. However, the Competition and Markets Authority (CMA) is investigating the acquisition, over concerns about 80 local areas where the two companies had competing stores and 12 areas where they would be future competitors. Despite the current investigation, future consolidation in the sector appears inevitable, as the UK discount space has become increasingly crowded in recent years.

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