Poundland hit as Christmas shoppers desert the high street and go online

(Adds CEO comments, shares)

By Paul Sandle

LONDON, Jan 7 (Reuters) - British discount retailer Poundland suffered in the run-up to Christmas as consumers deserted the high street in favour of online shopping, resulting in "disappointing" festive sales and a downgrade of profit expectations for the year.

Shares (Berlin: DI6.BE - news) in the group that sells everything from washing detergent to boxes of chocolates and packs of batteries for just one British pound ($1.5) slumped more than 10 percent to an all-time low of 172 pence after the retailer's third-quarter update on Thursday.

Poundland, which has rapidly increased its number of shops in recent years, culminating in the buyout of rival 99p Stores last year, was one of the first retailers to warn of a volatile Christmas two months ago.

"The trading conditions that we experienced in November continued through the third quarter, with high street customer numbers down year on year and this has impacted sales growth," Chief Executive Jim McCarthy said.

The effect of Briton's changing shopping habits, with more and more sales moving online, has been felt in force on the high street this Christmas.

Marks & Spencer (Other OTC: MAKSF - news) reported dire trading in clothing and gifts over Christmas, partly blaming unseasonably warm winter weather, while much of department stores group John Lewis's better performance came online rather than in store.

"We anticipated a pick-up in December because we had a very strong Christmas offer, and traditionally that's what we've seen," McCarthy said in an interview.

"Whilst we did have an uplift in December it wasn't the usual hike, and that was a function of depressed footfall. We weren't on our own but that's cold comfort."

He said that with no signs of the shift to online sales slowing, Poundland would have to work to adapt its offer for next Christmas.

The company posted a 29 percent rise in third-quarter sales, excluding its operations in Spain, to 424.9 million pounds ($621 million).

Two thirds of the growth came from the acquired 99p stores, while 9 percentage points came from the Poundland estate, including the 99p stores it has already converted.

It (Other OTC: ITGL - news) downgraded expectations for pretax to the lower end of expectations after Christmas, which analysts say contributes around half of the group's profit.

The market had expected on average 42.6 million pounds for the year to end-March, with a range of forecasts between 39.8 million and 45.8 million pounds, it said. ($1 = 0.6859 pounds) (Editing by Sarah Young and Susan Fenton)