Poundland could be put up for sale as owner takes £642million hit

Discount giant Poundland could be put up for sale after a plunge in profits.

The new boss of Polish owner Pepco Group said it would consider “every strategic option” for the struggling UK chain. It came as Pepco slashed the slashed the value of Poundland on its books by £642million. The write-down relates to tough trading for Poundland and a rise in costs in the wake of last month’s Budget.

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.

Poundland started in 1990 with a first store in Burton Upon Trent, Staffordshire and now has 836 shops in the UK and the Republic of Ireland. It employs around 18,000 staff and boasts up to seven million customers a week. The business floated on the stock market in 2014 but, two years later, was bought by Pepco.

Latest results showed sales at Poundland in the 12 months to the end of September fell 3.6% fall in stores open at least a year. Profits slumped 63% to £23million, blamed in large part on a flawed decision to replace Poundland’s existing clothing and general merchandise ranges with those from Pepco, with shoppers giving them the thumbs down and gaps on shelves. The non-cash write-down was due to a “significant decline in performance” and a “weaker outlook for profitability amid increasing competitive and cost challenges”.

Despite its challenges, Poundland still opened 84 stores in the year to September, including 46 converted former Wilko branches. But it also closed 71 stores as a result of “managed lease expiries” as well as a number where a Wilko it took over was nearby. Bosses are targeting smaller stores after concluding that larger outlets “are not where Poundland delivers best performance.” They also signalled a slowdown in openings, saying: “New stores will be opened only where we are confident of delivering an appropriate return on investment through delivery of our core offer to our customers.”

Andy Bond, Pepco chair, said: “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.”

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