Last week, it was announced that Majestic Wine and Punch Pubs owner Fortress had acquired discount retailer Poundstretcher, along with a new leadership team made up of ex-Morrisons staff.
In the announcement, Fortress said it would “improve the shopping experience for customers” and will invest in the business to “help Poundstretcher grow its offering and reach across the UK”.
The value chain, previously owned by Aziz Tayub, already trades from over 320 stores and has around 4,000 staff, but its new choice of leadership sparks some questions around the future of the business.
Holding former senior roles at Morrisons, Andy Atkinson will become Poundstretcher’s new CEO, while Trevor Strain will join the board in a non-executive role.
These new appointments indicate that under Fortress, Poundstretcher will look to focus on bolstering its food offering, as many discounters are adding and refining product categories to maintain the customers they gained at the peak of the cost-of-living crisis.
PwC senior retail adviser Kien Tan says the value sector is “a lot more mature and consolidated now” and the growth of grocery discounters, such as Aldi and Lidl, puts other value retailers at a disadvantage since these grocers have taken up space in food and health and beauty.
With consumer confidence on the rise, Retail Week explores if these changes have come too late for Poundstretcher?
Flair and brains
Poundstretcher is the latest in Fortress’s portfolio of retailers as the private equity group also owns Majestic Wine and Punch Pubs. Majestic has also recently bought Vagabond Wines out of administration.
Its acquisitions so far have proven fruitful, with Majestic having been on an expansion drive recently, hiring hundreds of new staff and expanding its store portfolio under Fortress.
For Clive Black, head of research at Shore Capital, Fortress is a “really high quality retail investor” who could well turn Poundstretcher into a “formidable resource long term”, particularly given its new executive and non-executive appointments.
“I think it’s really interesting that Fortress and Strain in particular have got together here because they clearly identified something that looks like an interesting opportunity,” says Black.
Black adds that Strain is a “rare and raw” talent, and his departure from Morrisons was a “loss” for the grocer.
Retail Week understands that Fortress has always admired the qualities of Atkinson and Strain, both of whom it got to know as part of then CEO David Potts’ senior management team as it weighed up a bid for the grocer in 2021.
A former Morrisons colleague said he is “not surprised” to see Atkinson and Strain working together again, as they offer a great mixture of “flair and brains”.
“I think he’ll be a big success at places like that [which] need real flair and having a marketing lead CEO is clearly the right thing for that kind of business,” he says. “If there’s any life left in that sector, they’ll be the ones to find it.”
While the value sector has seen a boom due to the cost-of-living crisis, it seems the glory days may be over as growth across the category has started to plateau.
B&M posted its results for the year to March 30 today, which saw a 10.1% rise in sales. However, analysts at Investec described its Q4 performance as “a little soft”.
Meanwhile, Pepco and Poundland reported a 2.8% decline in like-for-like revenue growth in the second quarter, and The Works saw like-for-like sales fall 4.9% in the 11 weeks to January 14.
Tan says many value-led retailers were hampered over Christmas as frugal shoppers wanted to “resist the temptation” of their non-grocery aisles.
“Unlike supermarkets with their premium own labels, they were unable to trade up customers in those grocery categories where they wanted to treat themselves.”
Adding more value
Now that the cost of living is easing, the value sector is looking beyond the traditional hodgepodge of general merchandise to offer something else to keep the customers they’ve recently gained.
For Pepco, this means appointing a new CEO – Stephan Borchert, former president of Sephora for Europe and the Middle East on the global executive committee, will take the reins on July 1.
Pepco said Borchert brings a “strong record” of leading companies in fashion, beauty, pharmacy and healthcare services, which could be where Pepco looks to home in.
The Range, Poundland and B&M have all been laser-focused on accelerating their store estates; all three benefited from the demise of Wilko last year as they continue to snap up its former units.
In addition to store openings, Poundland is aiming to transform the look of 150 stores by August, offering extended ranges of chilled and frozen food, clothing, general merchandise and homewares from parent company Pepco as well as third-party deals in general merchandise.
While it may be too early to say exactly where Fortress will invest to improve the success of Poundstretcher and differentiate it from its rivals, Black says it “hasn’t been top of the charts” in the value sector.
“It’s a business that probably needs a lot more structure with a reasonably long-term view. I think you could see them [Fortress] taking what are the best bits of Poundstretcher, and then bringing some other factors to make for quite an interesting adventure.”
While Black thinks sentiment in the category may be softening, he still thinks Poundstretcher can prove to be another shrewd acquisition for Fortress under its new leadership team.
“The new team has to make Poundstretcher a place where people want to come and shop and that will work in any economic climate,” he says. “If they can underscore what’s good about Poundstretcher and then bring some new ideas, there should be a basis for that business to do okay.”
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