Pepco considers sale of Poundland amid UK retail struggles

The Pepco Group is reportedly weighing the possible sale of Poundland as the discount chain battles significant challenges in the UK’s increasingly difficult retail environment. Poundland, which generates 30 per cent of Pepco’s total revenue, has seen a decline in performance, prompting the company to evaluate its strategic options for the business. This comes as Pepco shifts its focus towards higher-margin clothing and general merchandise.

Pepco recorded €2 billion in revenues for Poundland during the 2024 financial year; however, the chain has faced headwinds from slowing sales and rising costs. These challenges were compounded by a dramatic €775 million non-cash impairment charge, which contributed to the group’s pre-tax loss of €554 million for the year. Pepco’s like-for-like sales overall rose by 1.5 per cent in early 2025, but Poundland’s decline offset growth seen in other areas of the group.

The group aims to simplify operations by focusing on its core Pepco-branded clothing line. Speaking on the company’s plans, Pepco Group CEO Stephan Borchert highlighted strategic actions designed to prioritise the Pepco brand as the primary driver of group growth, while moving away from fast-moving consumer goods sectors. Financial performance in these categories has proved to be a drag on the company’s earnings, offering lower growth potential and thinner profit margins.

Pepco is also considering the potential separation of Dealz Poland, another discount chain within its portfolio. The group intends to concentrate on its higher-margin areas of business, which are expected to offer better profitability in the challenging European retail landscape.

Poundland’s profitability remains under pressure due to high operating costs and an uncertain consumer backdrop in the UK. With profitability expected to drop to between €50 million and €70 million this financial year, far below the €153 million achieved in 2024, the division continues to face an uphill battle.

Barry Williams, who previously served as managing director of Poundland until September 2023, has been reappointed to his former role on a permanent basis. His leadership is expected to guide the business through this transitional period.

Founded in 2004, the Pepco brand has grown into a European giant, operating more than 5,000 stores across 20 countries. Pepco’s shares experienced a modest rise of 0.8 per cent in Warsaw following the news of its strategic evaluation of Poundland and its future position within the group.