Poundland has successfully won approval for a £17.2m plan to restructure its store portfolio and stop the group from going into administration. The discount retailer currently employs nearly 14,700 employees and has nearly 800 branches in the UK. Yet, over the past two years it has experienced a nearly catastrophic financial crisis. These growing pains resulted in a reported pre-tax loss of £35.7 million for last fiscal year.
The plan for restructuring arrives as Poundland continues to struggle with worsening financial circumstances. Tom Smith KC, involved in the restructuring process, noted that the company had “significantly deteriorated during the last two years” and had “performed poorly in a difficult retail and economic environment.” Poundland is starting to do something about it. On top of this, they already announced plans to shut 68 stores and will be closing their frozen and digital distribution facility in Darton, South Yorkshire later this year. Another warehouse at Springvale in Bilston, West Midlands, which is scheduled to close early next year.
In January, Poundland expanded its range by 900 products. Now shoppers can browse the “£1 or less” aisle with a much expanded selection! While the company did a lot to promote these initiatives, the company still faced failures. The biggest blow was stopping online sales, leading to the lay off of 350 warehouse employees.
Poundland is pursuing an aggressive restructuring plan. They will extend the repayment schedule of £276.5 million in loans coming due by Sept. 1 by three years. Further, the retailer will put in place a £30 million overdraft facility and agree lower rents for a third of its stores. This holistic approach will create efficiencies and net savings through optimizing operations without sacrificing customer service and experience.
Barry Williams, Poundland’s managing director, said the company was “cautiously optimistic” about the Special Administration restructuring plan. He stated, “Despite the opportunity this ruling provides, I’m extremely mindful of its consequences for our colleagues – especially those leaving us as we streamline our store estate, distribution network and support teams.”
Mr. Smith further elaborated on the company’s future direction, indicating that the restructuring would focus on “revamping ranges, lowering prices and creating the simpler and more focused Poundland we know our customers are eager for us to deliver.” This focus on ensuring the customer experience is top notch demonstrates a willingness to move with the market as it changes.
Poundland was established in Staffordshire in 1990. Recently Polish group Pepco sold it, again for a pittance, to Peach Bidco, a subsidiary of private equity firm Gordon Brothers, for £1. Since then, the company has not been able to keep its 800-pound gorilla market position as it has faced rising competitive pressures and shifting consumer behavior.