UK's Poundland cautious on first half outlook

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LONDON, June 18 (Reuters) - British discount retailer Poundland cautioned that it expects trading in the first half of its new financial year to be subdued after sales growth slowed.

The firm, which sells all its products at the single price point of 1 pound from 588 stores in the UK and Ireland (Other OTC: IRLD - news) , said on Thursday it made an underlying pretax profit of 43.7 million pounds ($69.1 million) in the year to March 29.

That was up 19 percent and in line with analysts' average forecasts, while sales grew 12 percent to 1.12 billion pounds.

But sales on a constant currency basis for the 11 weeks to June 14 grew just 4.1 percent, a slow down from growth of 7.1 percent in the fourth quarter of the firm's 2014-15 year and growth of 10.2 percent in its third quarter.

With recession-era shopping habits entrenched, discount retailers, both in general merchandise and food, are taking sales from Britain's "big four" supermarkets - Tesco (Xetra: 852647 - news) , Asda, Sainsbury's and Morrisons.

However, there are signs major price cuts and service improvements by the big four have started to stem the flow of shoppers to the discounters.

Poundland said it expected the seasonally less important first half to be relatively subdued, reflecting tough comparative numbers and the weak euro.

It said the outlook for the second half was better, reflecting softer sales comparables, a very strong first half opening programme of at least 40 net new stores, against 28 stores last year, and the annualisation of last year's new store programme.

In all Poundland expects to open at least 60 new stores in the UK and Ireland in the 2015-16 year and continue with a trial in Spain.

Shares (Berlin: DI6.BE - news) in Poundland, which listed at 300 pence in March last year and hit a high of 421 pence in February, closed Wednesday at 311 pence, valuing the business at 769 million pounds.

In February Poundland said it had agreed to buy smaller rival 99p Stores for 55 million pounds. However, the deal is currently subject to a probe by Britain's competition watchdog, with its findings not due until October. ($1 = 0.6326 pounds) (Reporting by James Davey; editing by Kate Holton)