The owner of UK discount retailer Poundland has hoisted the “for sale” sign over the struggling 825-store chain as part of its efforts to separate it from the group.
Warsaw-listed Pepco Group, which also owns the Pepco and Dealz brands in Europe, said the board was exploring a potential sale of the brand as part of a move away from selling less profitable fast-moving consumer goods. The company is seeking to focus on clothing and general merchandise instead.
Poundland was founded by Dave Dodd and Steven Smith in 1990 and became popular with shoppers for selling all of its items — spanning toothpaste, confectionery and laundry detergent — at the single price of £1.
Pepco said at a capital markets day on Thursday that in recent months it had tried to simplify the offering of all three brands. But it conceded that the integration had not delivered “for customers or shareholders”. Businesses focused on fast-moving consumer goods had been “a drag” on the group, it added.
Poundland was a strong brand with about €2bn of annual sales, the company said. But it was also operating in an “increasingly challenging UK retail landscape”, and the challenges were “only intensifying”. It warned that the increases in wages and employers’ national insurance from April would add further pressure to Poundland’s cost base.
Nick Bubb, an independent retail analyst, expressed scepticism that the group would succeed in selling the chain.
“Pepco may well want to separate off the troubled UK business of Poundland, but it is not clear who would want to buy it,” he said.
Pepco’s shares were up 5.6 per cent at lunchtime in Warsaw, at 18.48 zlotys, although the stock has lost almost 60 per cent of its value since it listed in 2021.
Chief executive Stephan Borchert told Reuters on Thursday that the group had had interest from prospective buyers, and it expected a decision to materialise by September.
Pepco said in December it was considering options for the chain after it recorded a €775mn impairment charge.
The group said at the capital markets day it would focus on the Pepco brand in future as the “single future format and engine driver of group earnings”. Over the medium term, it would also consider the separation of “well performing” Dealz Poland, it said.
Group like-for-like sales rose 1.5 per cent in the eight weeks to March 2, with growth at Pepco and Dealz offset by continued challenges at Poundland.
The company added that it would achieve profitable growth this financial year, but Poundland’s underlying profits were expected to fall to between €50mn and €70mn, compared with €153mn in 2024.