Poundland up for sale as budget tax changes drive up costs
Poundland is to be put up for sale after the owner of the UK cut-price retail chain said it faced tough competition and increased wage costs from next month under Labour’s tax-raising plans.The Poland-based Pepco Group said it was considering “all strategic options” to spin out the struggling 825-store chain from the wider group, including a potential sale, as it focused on its more profitable Pepco brand.The move comes as WH Smith is expected to whittle down bids for its high street chain from suitors including the restructuring specialists Hilco and Alteri as well as HMV’s owner, Doug Putman.Retailers have warned of thousands of job cuts as they face higher costs from national insurance contributions (NICs) increases and slow sales growth, with UK households keeping a tight rein on spending amid rising costs of energy bills, groceries, rent and mortgages.Budget chains such as Poundland are having a particularly tough time due to rising competition from supermarkets, including Tesco, Aldi, Lidl, as well as the expansion of groups such as Savers, The Range and Home Bargains.
These retailers’ slim profit margins also give them little room to absorb additional costs, while low-wage shoppers now have little spare cash for non-essentials.Last year, Poundland’s rival Poundstretcher was bought by Majestic Wine’s owner, Fortress, in its latest rescue deal, while another rival, Poundworld, closed its 350 stores in 2018.Russ Mould, the investment director at AJ Bell, said it was no surprise that Pepco had put its UK business up for sale: “Poundland was once the envy of retailers across the UK, attracting significant footfall and customers filling their baskets on every journey.Now, Poundland has come to symbolise the forgotten wasteland of UK high streets, full of copycat outlets and sandwiched between charity shops and vape stores.“Finding a buyer won’t be an easy task and any deal will likely lead to store closures and job cuts.
Poundland needs to be slimmed down and refocused so it has a chance of getting back on top.”Pepco Group said Pepco made the “vast majority” of its earnings and the group wanted to “further build on that strong base ultimately as a single pan-European format”.Pepco warned over annual earnings at Poundland amid “more difficult” trading conditions and as costs soared.The company said underlying earnings would come in at between €50m and €70m (£41.9m and £58.
6m) after sales remained in negative territory over January and February.“Poundland is a strong brand that serves millions of customers every week and had around €2bn in annual turnover in financial year 2024, but it is also operating in an increasingly challenging UK retail landscape that is only intensifying,” it said.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotion“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 the group during financial year 2025, including a potential sale.”Retailers have been among the hardest hit by incoming measures announced in last October’s budget to increase NICs, on top of another increase in the minimum wage.
Pepco said it wanted to focus on its successful clothing and homewaresbased retail chain and would also look at options to offload the Dealz business in Poland at a later date,It will continue to manage the chain for now, while it confirmed it was reviewing its Pepco chain in Germany,As part of the plans, Pepco said the former Poundland managing director Barry Williams, who took over as the managing director of Pepco in September 2023, would return permanently to his former role at Poundland, where he recently stepped in, ahead of a possible sale,
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Coe targets Musk and Zuckerberg talks over ‘pond life’ abuse of female athletes
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