Lemons, Smirnoff Vodka And Gordon's Gin Are Displayed At A Tesco Extra Supermarket.
Lemons, Smirnoff Vodka and Gordon's Gin are displayed at a Tesco Extra supermarket in Watford, north of London August 8, 2013. Tesco, the world's number three retailer, is hoping the allure of casual dining, coffees and even yoga will help tempt Britons back to its ailing retail park stores as part of a 1 billion pound ($1.55 billion) push to revitalise business. Reuters/Stringer

The shares of UK retail firm Poundland Group fell the most in London after the retailer said the business conditions were “highly volatile” despite the arrival of holiday season shopping. The stocks of Poundland plunged as much as 22 percent to prices below 300 pence (AU$6.3), the rate at which the company sold its shares in a March 2014 initial public offering.

“The volatile current trading introduces uncertainty over their second-half profits,” noted Fraser Ramzan, analyst with Nomura.

The BBC had reported that UK retail sales volumes as a whole trailed in October following a drop in trading at food stores. The Office for National Statistics said sales volumes fell 0.6 percent followed by a 1.7 percent rise in September, when sales were driven by the Rugby World Cup. October’s monthly fall in food store sales was the biggest drop since May 2014.

Pre-Christmas sale

Poundland’s Chief Executive Officer Jim McCarthy told Bloomberg that results for the whole year would depend more on the six weeks leading up to Christmas.

Referring to the dismal sales, he said shoppers are holding back spending to save for the Black Friday bargains. Poundland will also participate in Black Friday for the first time “in a small way,” he said.

The retailer is expecting a loss before interest, taxes, depreciation and amortization to be in the range of 6 million pounds (AU$12.8 million) to 8 million (AU$16.98 million) pounds.

Acquisition affected

The retailer said its recently-acquired 99p Stores chain has also been hit and is going to lose money in the second half of the financial year.

Poundland had bought the retail chain in September after getting it duly reviewed by the UK Competition and Markets Authority. But during the five-month review period, 99p Stores suffered a drop in sales with obvious crunch in the availability of products.

Frugal October

Extrapolating the dip in sales beyond individual players, the Financial Times reported that retail sales in October was worse than the 0.5 percent decline predicted by economists.

Melanie Richard, ONS Head of Retail Sales Statistics, said despite the fall on the month, the longer term trend is one of growth in the retail sector. The figures do show that compared to 2014, the amount of goods shoppers have bought has increased at a rapid rate, surpassing the amount they have spent. The main reason could be the continued fall in store prices, the analyst said.

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