Pepco explores potential sale of Poundland amid trading challenges

Pepco has announced that it is “actively exploring” a potential sale of Poundland amid rising pressures on the business, and instead plans to focus on the Pepco brand as a single future format.

The discount retail group said its “ultimate ambition” is to operate under a single Pepco format, which largely drives the group’s earnings, with a focus on its higher margin Pepco clothing and general merchandise ranges. 

It comes as Q2 sales at Poundland were hit by “continued challenges” as the group continued to experience a negative like-for-like sales performance, impacted by similar trends seen in the last financial year.

Pepco Group like-for-like sales were up by 1.5% in the 8 weeks to 2 March 2025, however, with a strong performance from Pepco and Dealz offsetting Poundland’s underperformance in all categories.  

At its latest Capital Markets Day, Pepco said that over the last few years, it has attempted to integrate the Pepco, Poundland and Dealz operations into one brand with a simpler business model, expecting this would “bring both scale and efficiency benefits”. 

However, it said it has “become clear” over the last 12 months that this integration has “not delivered for customers or shareholders”, leading to lower revenue growth and profitability as Poundland dragged its performance. 

While Poundland reported a €2bn (£1.7bn) annual turnover in FY24, Pepco warned it is also operating in an “increasingly challenging UK retail landscape that is only intensifying”. It added that additional tax changes announced in the budget will also add further pressure to Poundland’s cost base. Therefore, its board is actively evaluating all strategic options to separate Poundland from the group in FY25.

In addition, the group announced that group CEO Stephan Borchert will assume responsibility for running Pepco, with Barry Williams permanently appointed MD of Poundland.

Borchert said: “The board and I are actively exploring separation options for Poundland, including a potential sale, from the group, with consideration also given to the separation of the well-performing Dealz Poland over the medium term. 

“Barry Williams did a great job as managing director of Pepco, returning it to like-for-like sales growth, and I am confident he will play a pivotal role in getting Poundland back on track, given his previous success there.” 

He added: “Our latest trading period – with continued positive Pepco like-for-like sales – reflects the brand’s momentum and underpins our focus on the business that accounts for the vast majority of the group’s earnings and our highest returns on capital.”