The owners of Poundland put the discount chain up for sale today blaming the “increasingly challenging UK retail landscape” for holding back the business.
London listed but Polish headquartered Pepco, which runs clothing stores under that across the Continent, said Poundland “has been a drag on the group’s financial performance” with lower profits and growth than the rest of the group.
In a strategic update today the company said it is “actively evaluating all strategic options to separate Poundland from Group during FY25, including a potential sale”.
Poundland was founded in 1990 by Dave Dodd and Steven Smith in 1990, originally selling all of its items at the single price of £1.
It started with a single location in Burton-upon-Trent but grew rapidly to reach its 100th location by 2003. It snapped up rival 99pStores in 2015. It started selling items for more than £1 from the mid-2010s onwards.
Last month Pepco said the UK business, which runs 825 stores, will increase the number of products it sells for £1 or less as part of efforts to get the chain “back on track” after coming up against increasing competition from rival retailers such as B&M.
Poundland revenues slid by 9.3% for the three months to December 31, with like-for-like sales down 7.3%, as it saw weaker clothing sales. Pepco made a loss of more than £450m after it was forced to take a huge writedown on the value of Poundland.
Pepco CEO Stephan Borchert said: “We are taking clear strategic action to focus on the Pepco brand as our single future format, to move away from FMCG and create a simpler business focused on higher margin clothing and general merchandise.
“Pepco will continue to be the engine of the Group’s earnings potential, and its strong customer offer and price leadership give it a compelling ‘white space’ opportunity to drive further profitable growth in its Central and Eastern European heartland, as well as select markets in Western Europe.
“The Board and I are actively exploring separation options for Poundland, including a potential sale, from the Group, with consideration also given to the separation of the well-performing Dealz Poland over the medium term.”
The company said that it had “sought to integrate the operations of its three brands (Pepco, Poundland and Dealz) with the aim to move to a simpler business model with one brand, one range and one team. We strived to transition at speed to one business with a unified customer offer and a single sourcing strategy, with the expectation this would bring both scale and efficiency benefits”.
“However, it has become clear over the last 12 months that this integration has not delivered for customers or shareholders. The FMCG-led businesses have 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 compared to Pepco.
“Poundland is a strong brand that serves millions of customers every week and had c. €2bn annual turnover in FY24, but it is also operating in an increasingly challenging UK retail landscape that is only intensifying. From April 2025, the UK government’s additional tax changes announced in the Budget will also add further pressure to Poundland’s cost base.
“Therefore, the Board is actively evaluating all strategic options to separate Poundland from Group during FY25, including a potential sale.”
