Poundland store closures ‘likely’ as sale nears completion

Poundland store closures are reportedly “likely” as Gordon Brothers, the former owner of Laura Ashley, has emerged as a frontrunner to take control of the group, according to The Times.
Bids for the group, which is owned by Pepco and employs more than 16,000 people across the UK and Ireland, are expected on Tuesday, sources told the paper.

Although sources close to the matter said that it looked likely that Gordon Brothers would acquire the group, other sources noted that the bids were yet to be finalised and that another frontrunner could emerge.

One source told The Times that Poundland will have to be sold for “effectively a pound” due to the “significant” turnaround project that it would have to undergo to improve its performance. 

Sources meanwhile told The Telegraph that bidders have identified as many as 200 loss-making stores ahead of formal offers for the group. Sources told the paper that the group was “unlikely to survive” without a large number of store closures.

In March, Pepco confirmed that it was “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.

At its latest Capital Markets Day, Pepco said that over the last few years, it 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 had “become clear” over the last 12 months that this integration had “not delivered for customers or shareholders”, leading to lower revenue growth and profitability as Poundland dragged its performance. 

Since then, several potential buyers reportedly tabled their offers to acquire Poundland, after the retailer has been hit by struggling sales and mounting losses in recent months. 

According to Sky News, Hilco Capital and turnaround investor Endless both set forth their respective proposal offers last month ahead of a deadline set by Pepco.

They reportedly joined Alteri Investors, which owns Bensons for Beds, while Modella Capital is also said to be among the interested parties, following its recent acquisition of WH Smith’s high street arm for £76m. 

A Pepco Group spokesperson told Retail Sector: “As announced at the Capital Markets Day on 6 March, Pepco Group is moving away from FMCG to create a simpler business focused on higher margin clothing and general merchandise, and is actively exploring separation options for Poundland, including a potential sale, from the group.

“With Barry Williams’ re-appointment as managing director, Poundland is executing a turnaround programme to get the business back on track, focusing on its core heritage strengths, and a simpler pricing proposition and customer offer.”