SHARES in Instore plunged by 20 per cent yesterday after the company behind the Poundstretcher retail chain issued its second profit warning in a month.
Instore, formerly known as Brown & Jackson, said that it had seen a “significant shortfall” in sales in the four weeks to February 11. As a result, the company said that profits for its full year to February 25 would be “substantially below current market expectations”, sending its shares down 10½p to 43¾p.
Angus Monro, the chief executive, said that although the group had missed its internal expectations, its performance against the wider market “was not disappointing”.
He added that there was no danger of the retailer breaking its banking covenants and that the company would close the year in a positive cash position.
The statement comes after Instore said last month that despite a “satisfactory” Christmas performance, cost overruns meant that it would not meet its full-year forecasts.
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Yesterday the retailer reported a 3.8 per cent rise in like-for-like sales for the six weeks to January 15, with sales under the Instore fascia up 5.4 per cent, while Poundstretcher recorded a 2 per cent increase on a like-for-like basis.
The group added that “in subsequent weeks”, its underlying sales were broadly level, but “significantly below internal expectations”.
Instore said that its margins for the period were “slightly behind” expectations, although they “continue to be at 1 per cent ahead of last year”.
Operating costs had continued to run ahead of forecast, especially at its new distribution centre, the company said.
Instore said that it had embarked on an external review of its process in an attempt to bring down its costs, and that it believed it was taking “the necessary actions” across the group to reduce its cost base before the new financial year.
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Seymour Pierce, the broker, cut its full-year profit estimates to £4 million, from £6.9 million, and to £6 million for next year, from £9.2 million.
Instore now expects its pre-tax profits to be “significantly below” the £6.8 million that was recorded last year, having said in January that although it would miss market forecasts, it would still achieve profits above £6.8 million.
Christo Wiese, the chairman of Instore, said: “The downturn in trading against our expectations in the last four weeks is disappointing. As a result, we expect the current challenging trading environment to continue and our forward planning reflects this.”