Poundland
Poundland said a sluggish performance on the high street offset a surge in sales Getty Images

Discount retailer Poundland saw its shares plunge more than 10% in early trading on 7 January, after it warned annual profit will be at the lower end of expectations, as a decline in high street customers offset strong sales growth.

Profits for the 12 months to the end of March are expected to be at the lower end of forecasts of between £39.8m ($57.9m) and £45.8m.

"While our Christmas and Halloween product offer was our strongest ever and December saw an improvement in sales growth, UK high street footfall remained below last year and this has impacted our overall sales growth," said chief executive Jim McCarthy.

Excluding its 10 Spanish stores, the FTSE 250-listed company said sales in the 13 weeks to 27 December grew 29.4% year-on-year to £424.9m (€570.9m, $619m) while sales on a constant currency basis were 30.1% higher than in the corresponding period in 2014.

Poundland said its existing stores contributed to nine percentage points of the overall increase, while the newly acquired 99p Stores took credit for 21.1 percentage points. Rebranded 99p Stores contributed to a third of the nine percentage point-increase attributed to existing stores, the retailer added.

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The London-listed group, which completed the acquisition of 99p Stores in September 2015, said it plans to reconvert most of the 227 remaining 99p Stores into Poundland outlets by April 2016.

"I am very encouraged by the sales uplifts of converted 99p Stores and by the speed and efficiency of the conversion process," said McCarthy.

"I expect the store conversion programme to be substantially complete by the end of April, and still expect to generate incremental EBITDA (earnings before interest, tax, depreciation and amortisation) of at least £25m from the transaction."

Meanwhile, the group said its Spain-based Dealz brand recently opened its 10th shop and saw total revenue almost double to £4.5m.

Looking ahead, McCarthy said the group remained on track to open around 70 net new Poundland and Dealz stores in the UK and Ireland in the full year.