Poundland sale set to value retailer at just one pound as bids pour in

Poundland, the discount retailer known for its ultra-low prices, is on the brink of being sold for the symbolic price of £1. Gordon Brothers, a US-based turnaround investor, has emerged as the frontrunner to acquire the struggling chain, according to sources close to the matter. The sale comes at a challenging time for Poundland as it battles declining sales and rising operating costs.

The retailer, which operates 825 stores across the UK and Ireland and employs over 16,000 people, reported £1.6 billion in sales last year. However, its like-for-like sales fell by 7.3% in the final quarter of 2024, a drop that has raised concerns about its ability to remain competitive in the UK’s discount retail market. Pepco, Poundland’s parent company, cited challenging market conditions and higher cost pressures as reasons for the retailer’s deterioration.

Poundland is expected to change ownership for a nominal fee due to the significant turnaround efforts required. The sale has attracted interest from several turnaround investors, including Alteri, Hilco Capital, Endless, and Modella Capital. Despite this competitive interest, sources believe Gordon Brothers is in pole position, although final bids have yet to be confirmed.

Pepco, which has owned Poundland since 2016, has been working on a turnaround plan for the retailer. Earlier this year, the company hired Teneo, the professional services firm responsible for overseeing the sale, and launched an extensive restructuring effort. The business has taken a £675 million impairment charge, reflecting both its struggles and the scale of the work ahead for any new owner. Store closures are considered likely under the next stage of restructuring.

Pepco’s strategy for Poundland has included a shift away from fast-moving consumer goods (FMCG) towards higher-margin products like clothing and general merchandise. This pivot, however, has not been without its complications. Logistical challenges, such as issues with stock sizes, have further hindered Poundland’s recovery.

The UK discount retail sector as a whole has not been immune to headwinds, but competitors like B&M, Home Bargains, and The Range have outperformed Poundland in adjusting to a difficult trading environment. Rising wages, tax hikes, and inflationary pressures have added to the sector’s challenges, leaving Poundland in need of a radical overhaul to remain viable. The new owner will face the critical task of bringing the retailer’s performance back on track.