Poundland appoints ex-B&Q boss as new chief executive
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Version 0 of 1. Poundland shares have slipped back as the discount retailer announced that chief executive Jim McCarthy was retiring after a decade in the job. The company said McCarthy would be succeeded in April by Kevin O’Byrne, former chief executive at DIY group B&Q., who joins as the business faces a number of challenges. Poundland has grown from 146 stores to 900 in Britain, Ireland and Spain under McCarthy’s tenure, and it recently bought rival 99p Stores for £55m after a protracted competition enquiry. But sales growth has slowed in a tough high street environment as the company integrates and rebrands the 99p estate, and profits are expected to fall in the full year. Poundland’s shares have dipped 5p to 176.3p but analysts were generally positive about the succession plan. David Mccarthy at HSBC said: Jim McCarthy’s retirement will be a disappointment, but is not a surprise. The succession plan appears well thought out. Jim will be leaving after the 99p Stores integration is completed in April, and Kevin O’Byrne will benefit from the tailwind of synergy benefits flowing through in the following year or so, while he gets firmly established. Credit Suisse issued an outperform rating on the shares with a 250p price target and said: We understand that Jim wanted to retire at 60 and the appointment suggests that search has been underway for some time. The change in the management comes at a time when the company is going through a period of significant change, and we think this might lead to some near term uncertainty around strategy. Poundland is about halfway through the integration of the 99p estate, but much work remains to integrate back office/supply chain. Key decisions on international strategy (Spain rollout) are pending. The rollout of a new multi-price format is about to kick off, and while the core Poundland offer now includes considerably more conditional multi-price offers, so decisions need to be taken on the acceleration of this transformation as well as steps to address the structural challenges (high street exposure) and the cost base (labour). Clive Black at house broker Shore Capital said We shall, naturally, be interested to see how Mr. O’Byrne’s plans for Poundland evolve. The group has been through considerable change recently, which continues apace with the...conversion of the 99p Stores estate. That change, particularly embodying the ridiculous phase II investigation by the Competition & Markets Authority (CMA), to our minds, sterling strength until recently against the euro and a tough UK market, burdened by weak high street footfall, has brought some pressure upon Poundland’s P&L in recent times; note: Poundland has not updated on its recent business performance in this update, which leads us to believe that the company still expects to deliver underlying profit within the guidance provided on the 7 January third quarter update. However, whilst so, we believe that once the company has a single Poundland fascia and platform then a tight management team can press on with energising a high intensity and impulsive business, build out the opportunity in the UK and Ireland, grow online and make a decision on the future in Iberia. All these considerations take place within a business that has a strong balance sheet, noting the leasehold nature of the group. |