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Is Poundland Group PLC Still Cheap?

PoundlandOne of this morning’s biggest risers was Poundland (LSE: PLND), lifting by more than 6% in early trade.

This came after a heartening 18% increase in first-quarter sales to £262.6m against 2013’s Q1 figure of £222.6m (this time last year saw Poundland increasing sales by 11.4% year on year).

Management pointed towards an improved product offer, Easter arriving slightly later this year, as well as nine new stores opening in the 12-month period as collective reasons for the group’s strong performance.

Chief executive Jim McCarthy commented:

“Trading in the first three months of the new fiscal year has been strong with total sales up 18.0% as our retail proposition continues to gain traction through offering amazing value to savvy consumers. After a pleasing start to 2014/15 we are confident of further progress through the year whilst recognising our critical third quarter lies ahead of us.”

Private investors looking at Poundland will be interested to note the first tentative steps into Spain — a country that’s economy has only just moved out of a two-year recession and many residents are still looking for ways to cut costs — with a Dealz store (the name of Poundland’s shops in Ireland) opening in Torremolinos, close to Malaga.

Having floated on the London Stock Exchange at 300p only in March, today’s surge brings the shares closer to 350p. Poundland stock has previously traded as high as 390p, and as low as 287p. But can this new generation of high-street value-seekers push the price even higher, is the question shareholders and curious investors alike will be asking themselves.

Discount retailers have been changing the face of the UK’s high streets in recent years; the likes of Aldi and Lidl have even eaten into a big chunk of the supermarket sector previously dominated by Sainsbury’s, Morrisons and Tesco. And it’s the latter that has seen its stock — in both senses of the word — battered.

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Sam does not own shares in Poundland. The Motley Fool owns shares in Tesco.