The fall of Poundland

Unexpectedly strong sales at Poundland are causing some to question plans announced by its US owner to “push the discount retailer into bankruptcy”, said The Times.

The future of the 36-year-old chain hangs in the balance after American investment firm Gordon Brothers filed a notice of intention to appoint administrators with the High Court last week – putting at risk the jobs of 12,000 employees.

Business model with a shelf life

Poundland began life as a market stall selling items for £1, and went on to become a high street chain that employs thousands of people and attracts more than a million customers a week. It was listed on the London stock exchange and, at its peak in 2014, was worth more than £1 billion. But high inflation has “exposed a business model which always appeared to have a shelf life”, said The Guardian. The “low-wage shoppers that make up the core of Poundland’s clientele” have less “spare cash for non-essentials”.

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When Poundland arrived on high streets in the late 1990s, it had that “unique selling point” of everything being priced at £1, Sarah Montano, a professor of retail marketing at the University of Birmingham, told the BBC. But rising prices have forced it to drop that policy, and now there are a slew of online and offline competitors who have “got their finger on the key trends” and are “offering very similar prices and, for quite a lot of products, they’re offering them cheaper”.

For the past decade, Poundland has gone through several owners and changes of business strategy but has never recovered its early success. Last year, Gordon Brothers acquired the Walsall-based business – for £1.

‘Long time coming’

Government ministers are said to be looking closely at whether Poundland’s owners are “unnecessarily” forcing “the embattled retailer into administration” and jeopardising thousands of jobs, said the Financial Times.

Gordon Brothers launched an “accelerated sales process” for the business last month but its demand for £30 million to cover a shareholder loan has “deterred potential bidders” and was the basis for its rejection of a going-concern offer from Ireland’s Martin Property Group. The rejection of that offer triggered the departure of three new directors, just two weeks after they had been appointed.

Should Poundland “go under”, several “suitors, including Lidl, Poundstretcher, Tesco, The Range and B&M, are understood to want to buy packages of stores”, said The Times. This could “save some jobs because the retailers would be legally bound to transfer staff onto their payrolls”.

The demise of Poundland has been “a long time coming”, Joshua Bamfield, director of the Centre for Retail Research, told The Sun. And the prospect of it “being chopped up into bits” is yet another example of the “erosion of the physical high street”.