Poundland issues worrying update over UK stores with 800 branches 'at risk'

The future of a bargain chain with 800 stores is reportedly uncertain as it explores a restructuring plan that could put shops at risk. Poundland's owner has reportedly drafted in advisors after its latest trading update showed a sales slump.

Pepco is said to be looking at "radical options" to address the issues at the chain, according to Sky News. Pepco has hired consultants from AlixPartners to address a sales slump which has raised questions over its future ownership.

City sources said this weekend that the crisis would prompt Pepco to explore more fundamental for Poundland, including a formal restructuring process that could prompt significant store closures, or even an attempt to sell the business.

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Another option reportedly being considered is a company voluntary agreement (CVA) which allows firms to look at ways to save the business, such as reducing rent rates with landlords or closing stores.

In its trading statement, Pepco said that Poundland had suffered "a more difficult sales environment and consumer backdrop in the UK, alongside margin pressure and an increasingly higher operating cost environment".

"We expect that the toughest comparative quarter for Poundland is now behind us - the same quarter last year represented a period prior to the changes made within our clothing and GM [general merchandise] ranges - and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year."

It added that Poundland would not increase the size of its store portfolio on a net basis during the course of this year. "We are continuing a comprehensive assessment of Poundland to recover trading and get the business back to its core strengths, including undertaking a thorough assessment of all costs across the business, as well as evaluating its overall competitive positioning," it added.

The appointment of AlixPartners came several weeks after Stephan Borchert, the Pepco Group chief executive, said he would consider "every strategic option" for reviving Poundland's performance.