Owner Of Poundland Hires Advisers To Help Address Sales Slump

Pepco Group is reported to have drafted in City advisers to explore radical options for arresting the growing crisis at its Poundland chain.

According to Sky News, consultants from AlixPartners have been hired to address the sales slump at the discount retailer, raising questions over its future ownership.

City sources quoted in the report suggested possible formal restructuring process, prompting significant store closures or sale of the business.

AlixPartners is understood to have been formally engaged last week, with options including a company voluntary arrangement (CVA) or restructuring plan being floated by advisers on a highly preliminary basis.

Sources close to the group told Sky News no decisions had been taken and immediate focus was improving Poundland’s cash performance and reviving the chain’s customer proposition, stressing that a sale process was not underway.

Last week, Pepco Group revealed that Poundland’s performance had deteriorated further over the Christmas quarter, with like-for-like sales down 7.3% (weak clothing + general merchandise sales and “challenging” market conditions.

Poundland trading statement: they had suffered “a more difficult sales environment and consumer backdrop in the UK, + margin pressure + an increasingly higher operating cost environment”.

“We expect that the toughest comparative quarter for Poundland is now behind us – the same quarter last year represented a period prior to the changes made within our clothing and GM ranges – and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year.

Poundland will also not open any net new stores during the year.

“We are continuing a comprehensive assessment of Poundland to recover trading and get the business back to its core strengths, including undertaking a thorough assessment of all costs across the business, as well as evaluating its overall competitive positioning.”

The appointment of AlixPartners comes several weeks after Stephan Borchert, the Pepco Group Chief Executive, said he would consider “every strategic option” for reviving Poundland’s performance.

He is expected to set out formal plans for the future of Poundland, along with the rest of the group, at a capital markets day on 6th March.

Among the measures the company has already taken to halt the chain’s declining performance has been to increase the range of FMCG and general merchandise products sold at its traditional £1 price point.

NamNews Implications

• Rivals have to be puzzled at how a ‘pound shop’ launched in December 1990…
• …can retail anything at a £1 price-point (having absorbed 3% average annual inflation)…
• ...meaning that a £1 in 1991 should be priced at £2.42 today.
• That said, great for Poundland to have made it work, thus far…
• But perhaps time to acknowledge that the Pound-shop concept has reached its limits…