Until last year, discount retail giant Poundland had lost its way. In a saturated market of£1 and 99p shops, it was difficult to differentiate the brand. But former Sainsbury’s director Jim McCarthy believed in the future of the business.
Since joining Poundland in May 2006, chief executive McCarthy has brought in a new team, sharpened up Poundland’s brand and product offer, smartened up stores and enhanced its manufacturing to get Europe’s largest single-price discounter back on track.
When McCarthy, who was previously managing director of Sainsbury’s convenience business, joined Poundland its like-for-like sales were down 3 per cent. However, under McCarthy’s guidance, in the six months to September 30 they rose to 4 per cent. At present, Poundland has 157 stores, but McCarthy wants to have 232 outlets and annual sales of£500 million in the next three years.
So, how has McCarthy turned things around?
Last November, he brought in Nick Hately, former financial director for convenience at Sainsbury’s, along with ex-Kwik Save regional director Tim McDonnell and former Christian Salvesen logistics director Ian Beaumont. “We designed Poundland’s goals and values, along with a new strategy,” says McCarthy.
McCarthy and his team have also whipped Poundland’s product offer into shape. They have removed the Poundland logo from all products, created more than 40 sub-brands, such as Toolbox, and introduced new categories, including greetings cards. The chain stocks 800 brands – the majority of which are food and drink. McCarthy says that an increasing number of manufacturers, such as Wrigley, are willing to produce specific sizes and pack types for discount retailers. “Increasingly, manufacturers need a route to market and the production of specific pack sizes is a good way,” he says.
The UK discount market is forecast to be worth£24.9 billion by 2011, with expected growth each year of about 9 per cent. McCarthy says that this “reflects the desire for savvy shopping, as people want to purchase more for less.”
Founded 17 years ago, Poundland’s no-nonsense retail offer is reflected in McCarthy’s leadership. He says: “My door is always open and I encourage debate at all levels. I make heroes and celebrate success and I have introduced a widened bonus scheme. I like open and honest management.
“I try to run a business with a serious aspect, but also have lots of fun,” McCarthy says. During the summer floods that hit the north of England particularly hard, staff at Poundland’s Meadowhall store in Sheffield showed incredible dedication and loyalty. McCarthy says: “We were up and running before anyone else, in just over a week – the staff were brilliant. They cleaned up, disposed of stock and put all the flood products, such as mops and buckets, at the front of the shop.”
In the longer term, McCarthy says Poundland will launch in Europe and the Far East, but only once it has reached 650 stores in the UK. Prior to managing Sainsbury’s convenience format, McCarthy expanded the T&S convenience chain from 30 to 1,200 stores, which he sold to Tesco in 2003. “Tesco developed a UK market, then looked abroad. We will follow a similar plan,” he says.
McCarthy’s rapid recovery of Poundland could be gearing the company up for a possible sale or float and McCarthy hasn’t ruled the idea out. “We always behave as if we are building a company for the long term,” he says. “If the business changes hands, I expect the journey to continue. I am not worried by it, the team is strong. Who owns Poundland is secondary to who runs it. It is how profits progress – not who owns it.”
McCarthy’s ultimate goal is Making Poundland great again, which is written on each employee’s Goal and Value card. This is one of several things that he has brought with him from his role at Sainsbury’s. “If Justin King [Sainsbury’s chief executive] taught me one major thing, it’s once you have a strategy, stick to it,” he says. Sticking to his strategy seems to be delivering the goods for Poundland.
Sales at Poundland, owned by US private equity group Advent International, have soared to£310.7 million for the 52 weeks to April 1, from£281.2 million the previous year. McCarthy says the demise of Kwik Save also created an opportunity for Poundland. He intends to launch a transactional web site in the next 18 months and is researching the idea through focus groups.
And, with his record in building up businesses, few would doubt McCarthy’s ability to make Poundland into a force to be reckoned with once more.
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