99p Stores founders to launch new single-price discount chain with Poundstretcher owner

The founders of 99p Stores are set to launch a new single-price discount venture in partnership with Poundstretcher owner Crown Crest, The Grocer can reveal.

Just six months after the £55m sale of 99p Stores to Poundland received final approval from the CMA, the Lalani family have set up an office at Crown Crest’s Leicester HQ and the partnership has begun holding meetings with grocery manufacturers regarding the new project, The Grocer understands. 

It is understood the new business will be a single-price offering but it is not known whether this will be £1 or below.

One supplier said Crown Crest, which is owned by the Tayub family, is keen to add a single-price discounting model to sit alongside its Poundstretcher business.

As part of its takeover of 99p Stores, Poundland plans to convert all the 99p Stores to its own offer, resulting in a 1p per item price increase. So far it has converted 100 of the 250 stores it bought to the Poundland fascia. Poundland’s integration of the 99p Stores has also been further hindered by worsening trading at the 250 stores in the run-up to the sale, exacerbated by the delays caused by the CMA’s investigation. 

When it eventually took control of the business in November, Poundland discovered sales and profits were haemorrhaging at 99p Stores as the loss of its credit insurance caused huge holes in stock levels. Poundland said at the time that the shortage of seasonal stock would lead to losses of between £6m and £8m in the second half. Recently filed 99p Stores accounts for the year to 31 January 2015 revealed losses had ballooned to £11m and revenues fell 2.5% to £361.3m as it restructured its stores and distribution centre in an attempt to turn around the business.

Poundstretcher currently operates 400 stores in the UK. In its latest results, the retailer reported sales of £438.3m for the year to 31 March. This was up 10.9%, while its pre-tax profits more than doubled to £2.84m. 

The Grocer also understands that Poundstretcher MD Ian York left the business in January and he has been replaced by Gerry Loughran, who has been 99p Stores merchandising and marketing manager since 2007.