Future of bargain chain with 800 stores uncertain as it explores restructuring plan that could put shops at risk
ONE of the UK's biggest bargain chains is facing uncertainty as it explores options that could put some of its 800 stores at risk.
Poundland's owner has reportedly drafted in advisors after its latest trading update showed a sales slump.
Bosses have hired consultants from AlixPartners as it considers possible avenues, including a formal restructuring process that could prompt "significant store closures", or even an attempt to sell the business.
Another option reportedly being considered is a company voluntary agreement (CVA).
A CVA allows firms to look at ways to save the business, such as reducing rent rates with landlords or closing stores.
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It's important to note that no decisions have been made and Pepco says its main aim is to improve Poundland's cash performance and revive the chain's customer proposition.
Stephan Borchert, chief executive officer of Pepco Group, is expected to set out formal plans for the future of the chain on March 6.
A Pepco Group spokesperson said: “As we stated in our Q1 results on 16 January, getting Poundland back on track is a key priority – and we are undertaking a comprehensive assessment of the business and taking immediate measures on improving Poundland’s cash performance and strengthening the customer proposition.”
It comes as Pepco announced its trading results for the three months leading to December 31, with revenue sliding by 9.3% at Poundland.
Bosses blamed a slowdown in clothing sales for the dip and said it would work to get the affordable home and food retailer "back on track".
Mr Borchert said: "The group delivered a mixed performance in its first quarter.
"Poundland saw like-for-likes fall, largely driven by continued underperformance in clothing and general merchandise following the transition to Pepco-source product."
He added: "Getting Poundland back on track is a key priority – we are undertaking a comprehensive assessment of the business and taking immediate measures on improving cash performance and strengthening the customer proposition."
It went on to say that Poundland would not increase its store numbers over the current financial year as it focuses on improving sales.
The retailer only opened two stores over the quarter and closed a total of 13.
A number of local shoppers have already noticed the bargain retailer vanishing from their high street.
In October, Maidenhead residents were left heartbroken following the closure of one of its branches.
Poundland on Maidenhead High Street will close for good on October 18 due to failing to secure an agreement with its landlord.
The retailer replaced what was once a Wilko back in 2023.
At the time locals branded the move "a joke" and said Poundland's exit would leave the area like a "ghost town".
This was on top of closures in Sutton Coldfield on October 5 and the closure of its Macclesfield site in August after it was unable to secure a new lease agreement.
Poundland struggles
The news is indicative of the harsh retail climate which has plagued high streets up and down the UK in recent years.
Rising costs coupled with shoppers tightening their purse strings have placed pressure on businesses and damaged sales.
Bargain retailers such as Poundland, B&M and Home Bargains, have performed better than others thanks to their low price point, but this has created rivalry.
Just this week, Poundland said it would increase the number of items which cost £1 or less from around 1,500 to almost 2,400 to appeal to cash strapped shoppers.
The firm has also been battling a rise in theft, with hundreds of employees now wearing bodycams to help catch criminals.
RETAIL PAIN IN 2025
The British Retail Consortium has predicted that the Treasury's hike to employer NICs will cost the retail sector £2.3billion.
Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April.
A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024.
Three-quarters of companies cited the cost of employing people as their primary financial pressure.
The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: "The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025."
Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
"By increasing both the costs of running stores and the costs on each consumer's household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020."
Today's report comes just a month after Pepco said it was facing "a higher cost outlook in the UK following the recent Budget" announced by Labour Chancellor Rachel Reeves.
Profits at the firm tumbled by £641million in the year to September, with bosses again blaming slow sales amid a poor outlook thanks to measures set out by Reeves.
A spokesperson also said the huge loss was "due to a non-cash impairment at Poundland that relates to the acquisition of the UK chain in 2016".
Chancellor Rachel Reeves said during her autumn statement she would raise employers' National Insurance contributions (NICs).
She also announced a reduction to the threshold at which businesses start paying NI contributions from £9,100 to £5,000.
It's estimated that the move will raise £25billion - the equivalent of around £800 per employee for each firm.
At the same time, the minimum wage will rise to £12.21 an hour from April, and the minimum wage for people aged 18-20 will rise to £10 an hour, an increase of £1.40.
The move has been blasted by a number of high street stores, including Gregg's, Sainsbury's and Next and Halfords who said the move could force them to raise prices and further bruise the industry.
Trouble for bargain chains
Poundland isn't the only British bargain chain facing issues at the moment.
The Original Factory Shop (TOFS), a beloved haunt for bargain-savvy Brits, is teetering on the edge of uncertainty.
Despite its popularity, the discount retailer hasn't managed to secure a buyer, raising concerns about its future on the high street.
It's understood that Teneo, a strategic advisory firm, has been called in to explore all options, including another attempt to flog the chain.
However, this could also involve the prospect of store closures or a company restructuring.
Elsewhere, Shoe Zone announced back in December that it will close several of its stores following a Budget tax hit.
It confirmed that the unviable branches would close in a trading update to investors.
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The closures come after it experienced "challenging trading conditions" in the first two months of the financial year.
It said consumer confidence had weakened further following the October Budget when the Government announced the NICs hike and with the National Living Wage set to be increased this year.
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