Poundland up for possible sale as soaring wage costs add to trading woes

Poundland’s owner is mooting a possible sale of the UK discount retail chain as it struggles amid tough trading and ahead of incoming Budget measures that will send wage costs soaring.

Poland-based Pepco Group said it was considering “all strategic options” to spin out the struggling 825-strong chain from the wider group as it focuses on its more profitable Pepco brand.

The firm said Pepco makes the “vast majority” of group earnings and the group wants to “further build on that strong base ultimately as a single pan-European format”.

It came as Pepco warned over annual earnings at Poundland amid “more difficult” trading conditions and as costs surge.

Poundland was the brainchild of father and son market traders Keith and Steve Smith, from Willenhall, who created the business with fellow former market trader Dave Dodd. It was later sold to Pepco Group, but remains headquartered in Walsall.

Read more:  The birth of Poundland in the West Midlands and how it transformed discount shopping in the UK 

Underlying earnings will come in at between 50 million euros and 70 million euros (£41.9 million and £58.6 million) as sales remained in negative territory over January and February, Pepco said.

Pepco said: “Poundland is a strong brand that serves millions of customers every week and had around two billion euros (£1.67 billion) in annual turnover in financial year 2024, but it is also operating in an increasingly challenging UK retail landscape that is only intensifying.

“From April 2025, the UK Government’s additional tax changes announced in the Budget will also add further pressure to Poundland’s cost base.

“Therefore the board is actively evaluating all strategic options to separate Poundland from group during financial year 2025, including a potential sale.”

Retailers have been among the hardest hit by incoming measures announced in last October’s Budget to increase national insurance contributions, on top on another hike in the minimum wage.

Pepco will also look at options to offload the Dealz business in Poland further down the line, but will continue to manage the chain for now, while it confirmed it is reviewing its Pepco chain in Germany.

As part of the plans, Pepco said former Poundland managing director Barry Williams, who took over as managing director of Pepco in September 2023, will return to his former role at Poundland ahead of a possible sale.

Stephan Borchert, chief executive of Pepco Group, said: “The board and I are actively exploring separation options for Poundland, including a potential sale, from the group, with consideration also given to the separation of the well-performing Dealz Poland over the medium term.

“Barry Williams did a great job as managing director of Pepco, returning it to like-for-like sales growth, and I am confident he will play a pivotal role in getting Poundland back on track, given his previous success there.”