ICSM Retail Insolvency News: going for a pound – or not - as it appears that Poundland owes ‘millions’ putting the sale to Gordon Brothers in doubt

By Harry Mottram: The sale of Poundland for a pound by owners Pep&Co Group heralded in the business press has been halted after it emerged the retail chain owes millions of pounds to a string of councils who haven’t been paid business rates. The Grocer – the retail’s trade publication for groceries – has reported the sale to the Gordon Brothers group is in doubt after court claims threw a spanner in the works.

Ian Carrotte of ICSM whose members include many in retail and grocery stores said it did sound hard to believe the deal could go through with only a one pound price tag. He said: “When a large retailer gets into financial problems and decides to sell up to the highest bidder it is not unusual for difficulties to arise. The sheer number of stores – often with different overheads and suppliers means that debts could be overlooked. Add to that pension schemes and the ongoing interest and costs of servicing loans and it is not surprising that there could be an unexpected hitch in the sale.”

The main concern for suppliers will be fears the sale would have written off unpaid invoices as it was expected around a hundred of the 825 stores could close with hundreds of staff facing the sack. And another concern already being raised on social media is the USA Investment outfit Gordon Brothers would look to ‘asset strip’ the chain of shops - selling the ones that make a profit and dumping any that are loss makers. If the councils now demanding their business rates are paid up before the sale can go ahead and thus persuade the courts to stop the sale as it stands then it is possible the buyers would pull out.

Poundland began back in the 1990s and grew rapidly as they undercut rivals with the British public enjoying a bargain – and it worked while they could buy in bulk from the Far East. As with all business models, things change. The rise of online shopping during Covid and the likes of Temu from China who are able to undercut just about everyone meant Poundland had problems. Add to that historic debts and fixed overheads, the rise in NI contributions, energy costs, inflation and interest rates – and suddenly the sums no longer added up.

Whether you love them or hate them Poundland and their like have helped to fill the spaces on the High Street left by names like Woolworths while many of their products can now be found at other cut price retailers and large supermarkets. Now we have to wait to see if - with some irony - if Poundland is sold for a pound.

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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com