The proprietor of Poundland, one of the largest discount retailers in the UK, has engaged City consultants to investigate drastic measures to mitigate the escalating crisis within the company.
Sky News has found that Pepco Group, which has owned Poundland since 2016, has brought on board advisors from AlixPartners to tackle a decline in sales that has raised concerns regarding its future ownership.
City insiders remarked this weekend that the ongoing crisis would lead Pepco to consider more foundational changes for Poundland, potentially initiating a formal restructuring process that could result in noteworthy store closures, or even a sale of the business.
AlixPartners is believed to have been officially enlisted last week, with possibilities including a company voluntary arrangement or restructuring proposal reportedly discussed by various advisors at a very early stage.
People familiar with the matter indicated that no decisions had been made thus far, emphasizing that the primary focus is on enhancing Poundland’s cash flow and revitalizing the chain’s customer offerings.
A sale process was not currently in motion, they clarified.
Poundland operates from 825 locations throughout the UK, contending with competitors such as Home Bargains, B&M, and Poundstretcher, in addition to Britain’s largest supermarket chains.
Last year, this British discount chain generated approximately €2bn in sales.
It employs around 18,000 individuals.
Earlier in the week, Pepco Group, the Warsaw-listed retail conglomerate which also operates under the names Pepco and Dealz in Europe, reported that Poundland experienced a like-for-like sales decline of 7.3% during the festive trading season.
In its trading update, Pepco indicated that Poundland faced “a more challenging sales environment and consumer landscape in the UK, compounded by margin strain and increasingly higher operational costs.”
“We anticipate that the most challenging comparative quarter for Poundland is now behind us – the same period last year was prior to modifications made within our clothing and general merchandise ranges – hence, we expect the negative sales trend for Poundland to ease as we progress through the year.”
Moreover, it was mentioned that Poundland would not expand the size of its store portfolio on a net basis throughout this year.
“We are undertaking a comprehensive evaluation of Poundland to restore trading performance and return the business to its fundamental strengths, which includes a meticulous analysis of all costs across the organization, as well as assessing its overall market position,” it stated.
The appointment of AlixPartners occurred a few weeks after Stephan Borchert, CEO of Pepco Group, expressed his intention to consider “every strategic option” for rejuvenating Poundland’s performance.
He is expected to unveil concrete plans for the future of Poundland, along with the broader group’s strategies, during a capital markets event in Poland on March 6.
Among the actions the company has already taken to reverse the chain’s slipping performance is the expansion of the variety of fast-moving consumer goods (FMCG) and general merchandise sold at its traditional £1 pricing point.
Poundland’s difficulties stand in stark contrast to the robust performance of the rest of the group, with Pepco and Dealz both exhibiting strong growth in sales.
A representative for Pepco Group, which has a market capitalization of approximately £1.7bn, declined to provide further comments regarding the advisor’s appointment.
AlixPartners also opted not to comment.
