Future of 800-store discount chain uncertain as it examines restructuring plan that could put stores at risk

ONE of Britain’s biggest discount 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 advisers after its latest trading update showed a drop in sales.

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Pepco – the Polish parent company – is said to be looking at “radical options” to solve the problems in the chain, according to Sky News.

Bosses have hired consultants from AlixPartners as they consider possible avenues, including a formal restructuring process that could involve “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 companies to look at ways to save the business, such as reducing rent rates with landlords or closing shops.

It is 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, CEO of Pepco Group, is expected to lay out formal plans for the chain’s future on March 6.

A Pepco Group spokesman said: “As we said in our Q1 results on 16 January, getting Poundland back on track is a key priority – and we are undertaking a comprehensive review of the business and taking immediate action to improve Poundland’s cash performance and strengthen the customer offer .“

It comes as Pepco announced its trading results for the three months to December 31, which saw turnover fall 9.3% at Poundland.

Bosses blamed a slowdown in clothing sales for the fall and said it would work to get the affordable home and food retailer “back on track”.

Borchert said: “The group delivered a mixed performance in its first quarter.

“Poundland experienced a decline in like-for-likes, mainly driven by continued underperformance in clothing and general merchandise following the switch to the 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 action to improve cash performance and strengthen the customer offer.”

It went on to say that Poundland would not increase its store numbers during the current financial year as it focuses on improving sales.

The retailer opened just two stores during the quarter and closed a total of 13.

A number of local shoppers have already noticed the retailer disappearing from their high street.

In October, Maidenhead residents were left heartbroken after the closure of one of its branches.

Poundland on Maidenhead High Street will close permanently on October 18 due to failure to secure an agreement with its landlord.

The dealership replaced what was once a Wilko back in 2023.

At the time, locals called the move “a joke” and said Poundland’s exit would leave the area a “ghost town”.

This was on top of closures in Sutton Coldfield on 5 October and the closure of its Macclesfield site in August after it was unable to secure a new lease.

Poundland is struggling

The news is indicative of the tough retail climate that has plagued high streets up and down the UK in recent years.

Rising costs combined with shoppers tightening their wallets have put pressure on businesses and hurt sales.

Bargain retailers such as Poundland, B&M and Home Bargains have outperformed others thanks to their low prices, but this has created rivalry.

This week Poundland said it would increase the number of items costing £1 or less from around 1,500 to almost 2,400 to appeal to cash-strapped shoppers.

The firm has also battled a rise in theft, with hundreds of staff now wearing bodycams to help catch criminals.

Today’s report comes just a month after Pepco said it faced “a higher cost outlook in the UK following the recent Budget”, announced by Labor chancellor Rachel Reeves.

Profits at the firm fell by £641m in the year to September, with bosses again blaming slow sales on a poor outlook thanks to measures put in place by Reeves.

A spokesman also said the huge loss was due to a non-cash impairment charge at Poundland relating to the 2016 purchase of the British chain.

Chancellor Rachel Reeves said under her autumn statement that she would raise employers’ National Insurance Contributions (NICs).

She also announced a reduction in the threshold at which businesses start paying NI contributions from £9,100 to £5,000.

It is estimated that the move will raise £25 billion – the equivalent of around £800 per employee for each company.

At the same time, the minimum wage will rise to £12.21 an hour from April and the minimum wage for 18-20 year olds 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 damage the industry.

Problems with supply chains

Poundland is not the only UK convenience chain facing problems at the moment.

The Original Factory Shop (TOFS), a beloved haunt of bargain-savvy Brits, is teetering on the edge of uncertainty.

Despite its popularity, the discount retailer has failed to secure a buyer, raising concerns about its future on the high street.

It is understood that Teneo, a strategic consultancy, has been called in to explore all options, including another attempt to flog the chain.

However, this may also involve the prospect of store closures or a corporate restructuring.

Elsewhere, Shoe Zone announced back in December that it will be closing several of its stores following a Budget tax hit.

It confirmed that the non-viable branches would close in a trading update to investors.

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 after the October Budget, when the government announced the NIC rise and with the National Living Wage set to be increased this year.

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