RISKY BUSINESS
Poundland on brink of crisis as firm suffers £642MILLION hit putting stores at risk
The chain has struggled following a steep drop in sales
POUNDLAND'S profits have tumbled by £642million - casting doubts over the retailer's future.
Soaring price hikes triggered by recent Budget moves and a drop in sales have been blamed for the jaw-dropping losses.
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The new boss of Polish owner Pepco Group said it would consider “every strategic option” for the struggling UK chain.
Stephan Borchert, the chief executive of Pepco Group, said: “It is important to look at every strategic option for this company to bring it back on track.”
Asked if Poundland would stay in the group, Mr Borchert said he would set out more on the group’s whole strategy and on Poundland when he hosts a Capital Markets Day next March.
The group added that it faces a "higher cost outlook in the UK following the recent Budget" following Chancellor Rachel Reeves decision to increase to employers' national insurance contributions and a further increase in the minimum wage from April 2025.
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A 3.5% drop in like-for-like sales has also left the retail chain reeling.
Borchert continued: "At Poundland, recent performance has been very challenging, impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.
"We are taking swift action to get Poundland performance back on track, focusing on a return to Poundland's strengths."
The group said it made the move to shift to Pepco-sourced ranges to help drive scale, increase cost savings and lower prices for customers.
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But it admitted: "It became clear as the year progressed that both the planning and execution of this implementation had shortcomings, with gaps in clothing and general merchandise product for the UK customer, impacting revenues and profitability during the year.
"It further became clear that our UK customers had a different expectation of the Poundland brand proposition compared with Pepco customers which has led to a fundamental rethink of approach going forward."
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REEVES' BUDGET
Chancellor Rachel Reeves confirmed the Government will hike the National Living Wage by 6.7% from April 1 back in October.
She said: "It was the Labour government that introduced the National Minimum wage in 1999.
"It had a transformative impact on the lives of working people.
"As promised in our manifesto, we asked the Low Pay Commission to take account of the cost of living for the first time.
"I can confirm that we will accept the Low Pay Commission recommendation to increase the National Living Wage by 6.7% to £12.21 an hour."
Meanwhile, the National Minimum Wage for 18 to 20-year-olds will be hiked from £8.60 to £10 an hour – a 16.3% rise and biggest increase in the rate on record, the Chancellor confirmed.
It will see eligible youngsters in full-time employment earn an additional £2,500 a year.
Both new rates are less than the £12.60-an-hour rate calculated by the Living Wage Foundation and paid by 15,000 employers.
The Real Living Wage is paid voluntarily to staff by bosses and is not a legal requirement unlike the Minimum Wage.
In Budget documents, the Government also said it plans to create a single adult wage rate for workers across the UK "over time".
But while the increase in National Minimum Wage announced today is good news for workers, it will pile pressure on businesses.
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Robert Salter, director at Blick Rothenberg, said: "The increase in the National Minimum Wage from April 2025 to £12.21 means that small businesses have seen a 37% increase in the National Minimum Wage since the 2020/21 year.
"This is a significant real increase on the costs faced by businesses and could easily result in increased unemployment over time."
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