Hundreds of Poundland stores to close under rescue deal

Yahoo

17-05-2025

Thousands of high street jobs are at risk in a Poundland rescue deal that could trigger sweeping store closures.
Bidders for the beleaguered retailer have identified as many as 200 loss-making stores that could be ditched as they put the finishing touches to takeover proposals this weekend.
Formal offers are scheduled to be tabled on Monday, with a handful of investors still in the running.
Industry sources said the discount chain was unlikely to survive without a large number of store closures, leaving another hole in the British high street.
Poundland employs 15,000 people across a total of 825 UK shops. It is understood that any new owner would look to jettison as much as a quarter of the estate within weeks of taking control.
Turnaround firms Hilco, Modella Capital, and Gordon Brothers are understood to be among a handful of shortlisted bidders.
Pepco put Poundland up for sale in March as its fortunes plummeted, unveiling the move alongside a plan to buy back €200m (£168m) of its own stock.
Its shares, which are listed on the Warsaw stock market, leapt as much as 11pc on the news.
Despite generating revenues of more than €2bn in 2024, Pepco bosses said Poundland had been a 'drag on the group's financial performance – with lower revenue growth, lower gross margins, higher costs to operate, and consequently, lower profitability and returns on invested capital'.
Rachel Reeves's National Insurance tax raid had also aggravated the situation, the company said, as it piled 'further pressure to Poundland's cost base'.
Months earlier, Pepco had slashed Poundland's value by nearly £650m, as it blamed a 'significant decline in performance' and spiralling costs.
Under new owners, closures are expected to be accompanied by a significant cash injection to help return Poundland to profitability. Analysts estimate it will require tens of millions of pounds to spearhead the turnaround.
The chain will also need a fresh debt package as its current lenders seek to get out. Prospective backers anticipate having to immediately pump in between £70m and £100m in order to stabilise the company.
Though Poundland is part of Polish-based Pepco Group, its fate is ultimately in the hands of a pack of Wall Street hedge funds, which bailed out Pepco's former South African owner Steinhoff in 2021.
The US investment firms, which are thought to include the $38bn fund Silver Point, stepped in after Steinhoff defaulted on billions of pounds of debt.
Retail sources have pointed to a move away from Poundland's 'everything's a pound' slogan almost a decade ago as a contributing factor in its decline. Products have since been priced between 50p and £5 instead.
The company has also admitted that an attempt to save costs by cutting back on suppliers backfired.
'It became clear as the year progressed that both the planning and execution of this implementation had shortcomings, with gaps in clothing and general merchandise for the UK customer, impacting revenues and profitability during the year,' the company said in December.
Pepco's owners also include Davidson Kempner, which manages nearly $40bn (£30bn) of funds, and has seized control of American retailers J Crew and Neiman Marcus through so-called 'loan to own'.
In both, it exchanged debt for equity via Chapter 11 bankruptcy proceedings.
Hedge funds swooped on Steinhoff in 2017 after the company owned up to financial irregularities, hoovering up its bonds and bank debt. They later converted their loans into a majority stake.
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